5 Reasons Why You Should Get Permanent Life Insurance

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So, you’ve decided to purchase life insurance. Congratulations on a wise decision that will help bring you peace of mind and financial security for your family!

But now you have some important decisions to make. One of the first decisions you will encounter is deciding which type of life insurance is best for you. As you research your options, you will quickly notice that you have two primary choices: permanent life insurance and term life insurance.

Permanent life insurance vs. term life insurance

Permanent life insurance and term life insurance have one sure thing in common: They both pay a death benefit when the covered person passes away. These benefits can be used by beneficiaries to replace income, pay off debts, leave a legacy, etc.

However, permanent life insurance and term life insurance differ in terms of coverage length, premiums and cash value accumulation. Let’s take a closer look at each of these differences:

Permanent life insurance vs. term life insurance chart
Permanent life insurance Term life insurance
Coverage length Offers lifelong protection Helps cover short-term needs with temporary coverage for a set number of years
Premiums Premiums are typically higher than term policies due to lifelong protection. Some policies offer level premiums for life, while others offer flexible premiums Typically offers affordable, level premiums
Cash value accumulation Builds long-term cash value that you can access. Some policies build cash value at a guaranteed minimum interest rate, while others allow you to build cash value by participating in the market No cash value accumulation

 

Advantages of permanent life insurance—a real-life example

As you can see above, both permanent life insurance and term life insurance offer solid advantages to policyholders. No matter which type of policy you choose, you are making a smart decision that will help bring you peace of mind and financial security for your family.

However, in many cases, permanent life insurance can be a better decision for the long run. Consider this real-life example:

Joshua is a 27-year-old plumber. He’s married to his wife, Julie, a stay-at-home mom, and together they have two young children. Joshua and Julie are purchasing their first house, and they smartly decide that it’s time to purchase life insurance for Joshua, just in case the unexpected happens.

Joshua and Julie decide to purchase a 25-year term life insurance policy. Joshua is young and healthy, so he locks in great, affordable premiums.

Fast-forward 25 years: Joshua is now 52 years old, and his term life insurance policy is expiring. Joshua and Julie still have many financial obligations. They still have a mortgage, in addition to an auto loan. Although their children are grown, Joshua and Julie still provide financial support to help with student loans. And although Joshua and Julie work hard to save for retirement, they know that their nest egg may not be up to snuff when it comes to future health care and long-term care expenses they may incur.

Joshua and Julie decide they still need life insurance protection, so they begin to look into their options. Joshua is now 25 years older, and although healthy, he now takes medication for high blood pressure. They quickly discover that life insurance premiums are much higher now than when they purchased Joshua’s first policy 25 years ago—due to Joshua’s older age and now pre-existing health conditions.

The couple settles on a permanent life insurance policy that will protect them for the rest of their lives. They know their permanent life insurance benefits may help the surviving spouse live a comfortable retirement, cover health care and long-term care expenses, and leave a legacy for their children. Plus, they appreciate the cash value accumulation, which they know they can access if they ever need or want the money for any purpose.

Joshua and Julie are glad to once again have peace of mind and financial security for their family. However, they do wish they would have selected permanent life insurance back when Joshua was 27 years old, when they could have locked in lifelong, lower premiums, and began accumulating cash value over the long run.

Benefits of permanent life insurance—5 reasons why you should get permanent life insurance

We are sure many pre-retirees out there can relate to Joshua and Julie’s situation. When you’re in your 20’s and 30’s, it can be difficult to foresee the lifelong need for life insurance. Plus, the lower premiums are attractive for many! Although the monthly permanent life insurance cost is typically more than a term policy, the benefits of lifelong protection and cash value accumulation often outweigh the lower premiums.

Here are 5 reasons why you should get permanent life insurance:

  • Permanent, lifelong protection

    —don’t outlive your peace of mind and financial protection.

  • May allow flexible premiums and death benefit

    —possibility for flexible premiums allows you to decide how fast to grow your cash value.

  • Cash value accumulates over time, in many cases tax-deferred

    —potential to take out policy loans without paying taxes when your policy remains in force.

  • May access your cash value for any purpose

    — potential to borrow from your policy’s cash value as needed to help fund college, pay off debt, supplement retirement income and more.

  • Death benefits are generally tax free to named beneficiaries and avoid probate, in most cases

    —help leave a lasting legacy for your loved ones.

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