Term or permanent life insurance? How can you make the right choice? Since various factors come into play, it is important to begin by reviewing the main differences between these two types of life insurance, before getting into the advantages and disadvantages.
A Summary Table of the Differences Between Term and Permanent Life Insurance
Here are the main differences between term and permanent life insurance:
| Term Life Insurance | Permanent Life Insurance |
|---|---|
| · You will be covered for a predetermined period of 1, 10, 15, 20, 25 or 30 years. · This insurance can be converted to permanent life insurance · You can choose your contract, which is renewed at each term. | · Life long protection · Permanent life insurance cannot be converted into term life insurance · For most types of permanent life insurance, premiums won’t increase · The contract will never expire · Some contracts allow you to build cash value |
What is life insurance and why is it important?
The loss of a loved one remains a painful event, and life insurance helps those left behind cope with the financial repercussions following their departure.
In other words, you can help provide for your loved ones in the event of your death with life insurance. By receiving a sum of money, your family will be protected against the financial hardships that might result from your passing.
Just as funeral pre-arrangements can help make your final wishes clear, life insurance allows you to plan ahead for your family.
Term Life Insurance
Advantages
The main advantage of term life insurance is its affordable cost. Moreover, depending on the type of contract, it is often possible to convert temporary life insurance into permanent life insurance. Finally, it is more flexible and adapts to your temporary needs.
Disadvantages
Term life insurance expires at the end of the contract and does not include a cash value. Upon renewal, premiums may increase. Finally, it does not work as a means of saving money.
Permanent Life Insurance
Advantages
Your coverage is guaranteed for life, even if your health deteriorates. For most permanent life insurance products, costs do not increase over time.
Thus, once you reach an advanced age, permanent life insurance can prove less costly than a term life insurance contract.
It offers the possibility of building cash value, which may be advantageous from a tax perspective, when filing your income tax returns. You will have the option to withdraw or borrow from the cash value. So, from this perspective, permanent life insurance provides several advantages.
Disadvantages
Permanent life insurance represents a long-term commitment, and it will be significantly more expensive than if you opt for term life insurance.
Term or Permanent Life Insurance: How to Choose?
Permanent or term life insurance, which one to choose? We are here to help you with your decision.
Key Factors to Consider
It is important to start by determining your long-term goals, financial situation and age.
No matter your needs, you will have to establish the amount of insurance coverage required. It will also be important to know how long you will need insurance for and for what reasons you wish to take out a life insurance policy.
These are some basic guidelines that are often used to identify the key factors to help you in your decision.
Why is term life insurance the most advantageous choice?
It is ideal for young families, homeowners with a mortgage, or if you own a business. It is affordable and there are even one-year renewable contracts available.
Why is permanent life insurance more advantageous?
If you are looking for a more comprehensive solution for you and your family, permanent life insurance might be a great option. Moreover, it offers ways to save money by building cash value, which is something that should not be overlooked in the long term.
In conclusion, term and permanent life insurance are solutions that meet different needs. When trying to make the right decision, do not hesitate to seek expert advice. Take the time to explain your situation clearly, while also discussing your needs in light of the factors already presented. After some deliberation, the option that is most advantageous to you will become clearer.
At Yves Légaré, in Laval, Longueuil and Pierrefonds, we take the time to provide you with comprehensive information on subjects surrounding life and the loss of a loved one. We are here to assist you at all times.
