Both term and permanent life insurance have numerous takers and both have their benefits and limitations. By comparing both of them side-by-side, it’ll be possible to gain a deeper understanding and make informative decisions in making a choice between the two.
Associated benefits
With permanent life insurance, corpus buildup occurs over time and you get cash account, which is tax-sheltered. After all, you do not have to keep on paying taxes on the games that you incur annually on your insurance policy. For a policyholder, permanent life insurance acts as a retirement plan that provides big returns during the twilight years.
With term insurance, you do not ever get such a promise from your insurance provider. It is only for a short period and typically lasts for one, two, five, ten, and twenty years. Also there are no associated benefits except death benefits for your survivors. As a result, you can never consider term life insurance as an investment vehicle for your retirement.
Policy tenure
Everybody knows that life insurance signifies a temporary life. These do not go on for long periods. Those who want can go for renewals but not all providers offer such options to their clients. Another feature of the policies is that the premium amounts remain fixed for our definite periods but start escalating after that. Resultantly many people fail to keep on with their term policies after a time. So, not only the premium money goes in vain but also your dependents do not eventually get the associated benefits.
Permanent life insurance does not work this way. Here the premium amounts remain fixed throughout and as a result, one doesn’t need to worry about continuing with it after a time. Here not only your family gets the associated death benefits, but also you can get a substantial lump sum after the maturity period.
Dividends
Your permanent life insurance policies come with dividends that function similar to those of a stockholder. Those who want can use these big dividends to bring down their premium rates and save substantial amounts without compromising on the associated benefits. If you do not want to do that, why not use it to build up your corpus. Compared to this term life insurance do not offer any dividends or precious little if any.
If it is your first life insurance policy than opting for term policy is not a bad idea. This can act as a stepping-stone for a more worthwhile and long-term permanent life insurance.
