Term vs Permanent Insurance

As your trusted Farmers Insurance agent, Jeff Champ, I often get asked about the difference between term and permanent life insurance. In this post, I’ll break down the basics, along with the pros and cons of each, so you can make an informed decision about which is the best fit for you.

Term Life Insurance

Term life insurance is straightforward and typically more affordable than permanent life insurance. You choose a specific period, usually anywhere from 10 to 30 years, during which you’re covered. If you pass away during this term, your beneficiaries receive the payout known as the death benefit.

Advantages:

Affordability: Term life insurance is generally less expensive than permanent life insurance.

Timely coverage: This type of insurance allows for coverage during the times when you have the highest financial obligations, like while raising a family or paying off a mortgage.

Financial flexibility: Lower premiums mean you may have more cash flow to put towards other financial goals, such as investing or saving for college.

Disadvantages:

Limited coverage duration: Term life insurance expires after the term period, and renewing the policy can be costly.

No cash value: Unlike permanent life insurance, term policies do not accumulate a cash value over time.

Permanent Life Insurance

Permanent life insurance, on the other hand, is a life insurance policy that never expires. It provides coverage for your entire lifetime and also includes a cash value component that grows over time.

Advantages:

Lifetime coverage: Permanent life insurance provides coverage for your entire life, ensuring that your beneficiaries will be taken care of no matter when you pass away.
Cash value accumulation: Many permanent life insurance policies have a cash value component that grows over time and can be borrowed against.

Flexible premium payments and tax benefits: Some types of permanent life insurance allow you to stop making payments and still enjoy the benefits of the coverage. Plus, they offer a variety of tax advantages.

Disadvantages:

Cost: Permanent life insurance is typically more expensive than term life insurance.

Risk of policy lapse: If you miss a payment or cannot afford to make payments anymore, your policy could cancel.

Non-convertible: If you buy a permanent life insurance policy and later decide you no longer need coverage, you can’t convert it to another type of policy and could lose the money you’ve already paid into it.

Choosing between term and permanent life insurance depends on your personal situation, financial goals, and long-term needs. I’m here to guide you through these considerations and help you find a policy that best fits your life. Don’t hesitate to reach out if you have any questions or would like to discuss your options!

Stay safe and insured,

Jeff Champ, your Farmers Insurance Agent