Term Life Or Permanent Life Insurance?
Young families interested in purchasing life insurance for the first time are usually confounded by the choice of whether to purchase a term or permanent product. “Which costs more?” “Which provides the best investment?” “Which is more suitable for our age and lifestyle?” And, of course, in each case the answer will vary depending on the particular objectives of the applicants.
To begin, Term life insurance offers a low-cost solution for a temporary period. Couples who are laden with debt and raising a young family might want to consider the term life option out of necessity alone – they simply wouldn’t be able to afford the premiums associated with a permanent policy. Second, for those who worry about covering a specific financial need, such as the cost of a mortgage, line of credit or a business loan, term insurance is the ideal solution. Coverage of $250,000 can be purchased for, say, twenty years for $37.58 a year (40-year-old male non-smoker with Canada Life). Not bad when you consider that the same amount of coverage under a permanent life policy would run to $214.20 a month (whole life coverage with Empire Life)! As you can see, the difference can be staggering!
By comparison, the permanent insurance option (either whole life or universal life), for all its apparent cost disadvantages, actually carries with it a number of benefits for those whose needs are different. For example, for those interested in an investment component to their policy, the permanent plan is the only way to go. When the policy period concludes, the applicant’s paid-in premiums are available to reinvest in a new policy that is more appropriate for that stage of life. Depending on the policy, there may also be an option to invest premiums in a wide range of securities and to withdraw the paid-in proceeds during the life of the policy in case of an emergency. Just beware that early withdrawal may also carry with it a financial penalty.