It’s important to understand the basic differences between term life insurance and permanent life insurance in GA.
With term life insurance, you’re essentially “renting” life insurance, which provides a straight death benefit in exchange for annual premiums.
These policies do not contain any type of cash value or investment option. They have one major purpose and that is to provide money to your beneficiary in the event of your death.
Term life insurance has one major purpose — to provide money to your beneficiary in the event of your death.
A beneficiary can be perhaps a spouse, children, or charity. Anything or anyone who would stand to lose out financially if you no longer provided income.
As an example, this type of insurance is a great way to cover the cost of a child’s future college education. You can also use term life insurance benefits to pay off a home mortgage.
It is also the most affordable – especially for those who are young and in good health.
In fact, for individuals who want a large amount of death benefit for a low premium cost, term policies are the way to go.
As the name suggests, term life covers only a specific time period. These are usually 10, 15, 20, or 30 years.
Term policies are in fact “temporary” coverage.
The insured can re-apply for a new policy when their first term life insurance policy expires. The new policy will take into account their new age and health condition.
Since you are older and may also have a new health condition – the new policy’s premium will likely be higher.
If you've been diagnosed with various health conditions, you may even be uninsurable. This means you may not be able to get future coverage.
Term Life Insurance Quotes
The premiums for term life insurance plans are typically lower than whole life insurance. This is especially true for young, healthy applicants.
These policies can provide a great way to get a high amount of death benefit coverage for a very low price.
In fact, if you’re looking for the cheapest life insurance you can buy, definitely go with a term option.
In some cases, term policies can include a conversion rider. This allows the policy to convert into a permanent policy after a certain period of time.
With convertible policies, the insured is able to convert from a term policy over to a permanent life insurance policy. If the premium payments have been made, there will be no medical exam. This means you can qualify at the same health level you were at when you first applied (perhaps 10+ years ago).
This can mean a big difference in premium!
There are so many different types of term life insurance. So you really have your pick based on your situation.
Permanent Life Insurance
This type of life insurance will include both a death benefit and a cash value component.
The cash value in a permanent policy grows on a tax-deferred basis.
This means there are no taxes which are due on the gain until the time the money is withdrawn. This can essentially allow the cash to grow and compound on an exponential basis.
Unlike term life insurance, permanent life policies do not have any "end date" of coverage.
Those who purchase permanent coverage will typically keep their coverage for the “whole” of their lives. That's why it is often referred to as "whole life insurance".
These plans are usually intended to cover longer-term needs, as well. This makes them really useful for estate planning.
Permanent life is also often purchased on younger individuals and then kept for many years. This way, the person has life insurance coverage, along with a savings vehicle which grows tax-deferred over time.
There are three main types of permanent life insurance:
Whole Life – the most common permanent policy. It has the standard death benefit and uses a savings account as its investment piece. Along with deposits from your regular premiums, the savings account grows from dividends the insurance company pays into the account. To help you get a better understanding we did an entire write up on whole life insurance.
Universal or Adjustable Life – These policies offer a greater amount of flexibility than standard whole life policies. Many offer you the opportunity to increase your death benefit after passing a new medical examination. These policies will also let you pay your premiums from your cash balance. This can be a useful feature in times where your personal finances are stretched. Get a better understanding of our article on universal life insurance policies.
Variable Life – Similar to whole life except you can take the money in your savings account and invest it in stocks, bonds, mutual funds, and money market accounts. This comes with more risk so make sure you have a good grasp on those risks before purchasing a variable life insurance policy.