Which Type Of Life Insurance Should I Buy?

How do you make sense of all your choices when it comes to buying life insurance?

It's not as difficult as it seems. There are two basic kinds: Term life insurance and permanent life insurance.

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The main reason for buying a life insurance plan is to provide your loved ones with the financial support they will need when you’re gone. You don't want to leave your family alone and unable to pay the bills. So which kind is best? It depends on your situation.

Want to Save? Consider Term Life

Dollar for dollar, term life insurance will give you more protection. Term life insurance only protects you for a limited period of time. That means that most term policies go unclaimed, so companies can offer them at very low rates.

Insurance companies know that 95% of people will outlive their term life plans. So a 35 year-old can purchase a 20-year term policy worth $500,000 for less than $1,000.00 per year. On average, term life insurance costs about five times less than a permanent life insurance plan.

Some important things to consider about term life insurance include:

• There are no complicated charges or expenses. With term life, you just have to pay your premiums.
• Many term life policies can be converted into whole life plans when you get older.
• Because it costs so much less than a permanent life policy, many experts suggest buying term life and investing the difference for your retirement. With a well-planned retirement account, you won't need a life insurance policy after you stop working.

Need Security and Flexibility? Consider Permanent Life

Most permanent life insurance policies are guaranteed to pay out. Permanent life insurance also offers the benefits of having an actual cash value, meaning it can work for you as a source of income.

The premiums on permanent life insurance are higher than on term life. But if managed correctly, a permanent life policy can be an investment tool that makes you money.

Before you decide on a permanent life policy, consider:

• You’ll have permanently guaranteed premiums and benefits.
• Over time, you’ll have access to a supplemental income stream.
• If you purchase a permanent life policy while you're young and healthy, you could save money.
• The benefit value or payout of your whole life plan may increase significantly over time.
• Some permanent life plans offer riders that can provide you with long-term care coverage at no extra costs.
• Your whole life policy carries a cash value that can increase over your lifetime.

Not sure which kind of policy you should buy? Talk with a professional life insurance agent. You can use our free quote service to get matched with agents licensed in your area. They'll help you make sense of your options, and find a policy that's a good fit for your financial needs.