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Who needs permanent life insurance and why?

Saturday, September 6th, 2014

There are two main types of life insurance policies – term and permanent, although they are similar in one part – death coverage, in which case your beneficiary receives the money; all other things about those policies are completely different. The main question with the permanent life insurance is who needs it, and what are the benefits of buying this type of insurance?

To answer those questions we’ll first need to explain the term insurance, as the name says this type of life insurance lasts for a certain time period, usually twenty or more years. Once policy expires, it’s useless. In contrast to this, permanent life insurance provides coverage throughout your whole life and it has certain bonuses attached to it since part of the money paid in form of premiums is used as a form of savings which can be withdrawn if needed. This is why this type of life insurance is really interesting to some people, as it can be used to plan ahead in more than just one way. Portion of the money that is kept as savings will accumulate over time and will “build” its cash value, in other words the longer you hold permanent life policy the higher your total return with this type of investment will be.

Where can your savings with permanent life insurance be used? Again let’s first take a look at perm life insurance policy. You buy this type of insurance because you care for financial safety of your loved ones, your spouse, your kids or maybe relative who is dependent on you. Term insurance covers only one scenario – your premature death. Let’s just say that you want to provide the same security to your loved ones even before you die. You or your spouse may need additional health care which costs, your children may have graduated but your grandchildren may need the money for their own education, right? There are other scenarios where you may need some additional cash and with permanent life insurance policy you get exactly this – a certain financial security while you’re still alive.

The costs of permanent life insurance are way higher than those of term insurance, why? Compared to term insurance policies they are, but since term insurance only provides coverage of death and since it usually expires before the age of 65 your chances of dying during this period are low – so are the premiums. Permanent life insurance will certainly end when you die – agreed sum will have to be paid in full and this is the main reason for the high costs of this type of insurance. Again, because there is a sum of money always being kept for withdrawal, should you want to make one, insurance companies will charge you for this service – all in advance.

In conclusion, if you’re thinking about buying permanent life insurance, you’ll need to think about your priorities first – if you have someone completely dependent on you it’s always good to have some extra money ready for emergency situations. On the other hand, if you’re young and wish to provide a financial security to your loved ones in case of death then term insurance policy is the only thing you need.


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