How to Select the Best Life Policy for Your Needs

If you are in the market for life insurance, there are two primary types of policies: term and permanent. What are the differences? How can you decide which type of policy is right for your needs?

Term life insurance:

* Term life provides insurance for a limited number of years. Term life insurance enables you to match the length of the term to your needs. If you have young children and want to ensure that there will be resources to help them pay for college in the event of a tragedy, then a 20-year term policy might be a good option. If you have a large debt that will need to be repaid within a certain timeframe, then you may consider a term life policy that would span that timeframe.

* Another reason why you might consider a term life policy is due to budget constraints. Term policies are typically less expensive than whole life or other permanent life policies. So, if you would like a significant amount of life insurance, but do not have the budget for a whole life policy, you may consider a term policy. If you still need coverage when the policy expires, then you can renew it.

* The downside of a term policy is that you will not be able to build equity or savings from the policy.

If your financial needs may change, you may consider a “convertible” term policy. Convertible term policies can be switched to a permanent life policy, but the premium will increase when converted.

Remember, premiums are lowest when you are young. So, the sooner you purchase a life policy, the lower your premiums.

Something else to consider: some life policies require a medical examination if you wish to renew.

When should you consider a permanent life insurance policy?

* Will you need life insurance coverage for your entire life? A permanent policy lasts for your entire life, no matter when you pass away.
* Permanaent life policies also include some sort of savings element that could be an excellent source of funds for a variety of purposes. You can borrow from these funds, even if you have questionable credit. Your death benefit may also be used as collateral for a loan, and if you die before it’s repaid, the insurance company will simply collect its share before determining what’s it paid to your beneficiary.

Most premiums for permanent policies are higher than for term insurance. However, the premium in most permanent policy remains, while term life premiums may vary depending on the type of policy and whether you renew the term.

Permanent life insurance policies include whole life, universal life, variable life and variable/universal life.