What is the comparison between term insurance and permanent insurance?

Question

What is the comparison between term insurance and permanent insurance?

Answer 1

By permanent I assume you are referring to Whole life or Universal. (That is the old names.) The short version is to buy term and invest the difference.

Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value.

This is compared with Term life insurance where insurance is purchased for a specified period (typically a year, or for level periods such as 5, 10, 15, 20 even 25 and 30 years) where a death benefit is only paid to the beneficiary if the insured dies during the specified period.

Because Permanent life insurance programs must always pay out, the cost of insurance is considerably higher than term insurance. Term insurance is referred to as pure death benefit with no cash accumulation vehicle tied to it. Because of this, term programs remain 8 to 10 times less expensive than a permanent program for the same coverage. Most people are drawn to term insurance for the low cost and the ability to invest the difference in separate financial products. Doing so has a severe drawback in some cases because all term policies eventually expire and the client would then have to pay a higher premium based on his attained age or he may not be able to qualify for a new policy at that point. In these situations, money earned from investments would not measure up to the coverage the policy would have provided.

Answer 2

Go to Yahoo Finance and click on "Personal Finance."  There is an explanation of life insurance there.

Answer 3

Other considerations:  

A term policy's cost increases at the end of each term.  

If you own a term policy and you want to increase your coverage, your health will have to be re-evaluated.  If your health is good, you'll be able to get more.

With permanent policies, your payments can be fixed - no increases.

If you're not a good saver/investor, a permanent policy isn't all bad.

Answer 4

Term insurance will expire.  Permanent life insurance will not expire until you do.  Term life insurance usually cost about 90% less than permanent life insurance.  http://www.lvhealthins.com

Answer 5

Permanent is forever, and the rates are much higher.  Well, that's the contrast.  The similarity (comparison) is, if you die while the policy is active, it pays out.