Owning a home and raising a family often means having serious discussions about things you'd rather not talk about. At the top of the list is one's impending mortality. However, you need to talk about your mortality if you are going to establish a plan so your children and spouse won't be financially devastated if you were suddenly out of the picture and unable to earn money to pay the bills anymore. One way to protect the family is to obtain an insurance policy to cover major costs and expenses after you leave. Here are a couple of advantages of using a term life policy over a permanent life insurance policy to cover some of those expenses.
Length of Policy
You can get a term life insurance for only the amount of time you need it. Term life policies typically run in five year increments. If your kids are in their teens, and you want to make sure you have enough coverage for their college education, you can purchase a policy that only covers 10 or 15 years. You are not locked into buying a more expensive permanent life insurance policy that lasts a life time provided you pay all the installments on time.
Term Cost vs. Permanent Life
Term life is a lot less expensive than a permanent life insurance policy and is a good financial tool those with limited funds can use to protect their family. A 35 year old person in good health who doesn't smoke can typically get a $250,000 policy for around $30.00 a month for a policy that will last 20 years.
A permanent life insurance for the same amount of money would cost roughly $365 per month, or over 10 times what a term life policy costs.
You are guaranteed a certain death benefit that will go to your beneficiaries when you die. This is not always true with some permanent life policies. For instance, a universal permanent life insurance payout can fluctuate over time.
The key issue is that term life is like a car insurance policy. You are paying for an exact amount of coverage over the life of the policy. With a universal policy, part of the premium is put into the stock market where it can grow or decline. Your death benefit will also grow or decline as a result of how well the stocks are doing that the insurance company invested part of your premium in.
Deciding how to purchase a life insurance can be complicated. Your local life insurance representative should be able to help you make the right decision for you and your family.