Put simply, life insurance is meant to replace the income that you contribute to your family in the event of your death. If you’re dead, you aren’t providing any money to your family’s current or future living expenses, hence, the need for coverage. How would your family survive financially if something were to happen to you tomorrow?
Unlike term insurance, permanent insurance is meant to cover you for your entire life; hence, it’s “permanent”. There are two payment options. First, you can pay for the rest of your life (until age 100). This is the cheaper option, but I know what you’re thinking…. for the rest of my life??? That sounds like a long time. The second option is “paid up permanent insurance”. Like term insurance, there is also a first payment date and a last payment date, but unlike term insurance on the last payment date the policy is said to be “paid up.”
What Is The Difference Between Term Life Insurance and The "Creditor Protection Insurance" I Got From My Bank?
Many borrowers may hear of “creditor protection insurance” when they take a mortgage or a large loan from the bank. Consider the following and see if term life insurance is a better option:
It depends on how much you earn, the goals for the family and when you plan to die. Admittedly, the last item is generally hard to know. But, you should start asking yourself these questions, which is not always pleasant because you have to imagine yourself dead:
Term life insurance is the most common type of life insurance. You are entering into a time-based contract that in exchange for your fixed monthly payments – called premiums – the insurance company will pay a set amount to your beneficiary if you die while the contract is in place. It’s “term” because the premium amount is for a set period, say 10 or 20 years, and the premiums will never go up for the duration of the term.
Off the top, permanent insurance seems like the better deal. Let’s put it this way, it’s a more robust product and because of this the price is higher. But they both have their value depending on your need. Many people consider purchasing a blend of the two.
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