Team Versus Permanent Life

Charles Goodman Group: Experienced Bedford Insurance Broker

Term life and permanent life insurance policies are fundamentally different in most respects. Permanent life coverage, which includes whole, variable and universal life, provides a complete financial package with a managed investment account that adds cash value to the policy. As the name suggests, a permanent life policy lasts for the rest of your life, and it pays you benefits during your lifetime, such as annuity during retirement, in addition to the death benefits paid to your beneficiaries. A Bedford insurance agent can tell you about the various options available to you and recommend the ideal policy based on your age, income and health.

If you have dependents who rely on you for income, at the very least you should have term life coverage to insure your income against your unexpected death. Term life typically costs less than permanent life but has no additional investment component and may expire when you presumably no longer need it to protect your dependents from the loss of your income.

For example, a 45-year-old woman may purchase a 20-year term life policy with fixed premiums and a death benefit that decreases each year.

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The reason it decreases is that, each year, the woman has fewer years of work remaining and therefore less potential income to insure. At 65, she can retire after having supported her dependents for as long as necessary. She has no further need for a death benefit, so she doesn’t need to purchase another term life policy. If she had purchased permanent life instead, her beneficiaries would still receive a death benefit when she died, even if she lived to be 100. She would have to continue paying premiums throughout her retirement, but she would have a tax-deferred investment that had been earning interest since she was 45.

With universal life, policyholders have the flexibility to pay their premiums when funds are available. These policies usually earn money from financial markets and therefore fluctuate with the economy as stocks and mutual funds do. The most stable and dependable permanent life policy is called whole life, and it offers fixed earnings on the face value of the policy as well as a guaranteed death benefit. Some permanent life policies offer a benefit called annuity certain, which transfers your remaining annuity payments to your beneficiary when you die. These types of benefits allow you to stop worrying about income when you reach a certain age, and they give you the knowledge that your loved ones are taken care of when you pass away.