Term Life Insurance Article

The difference between Term Life Insurance and Permanent Life Insurance

There are, as the subject line suggests, two basic types of Life Insurance. One pays out in the event of your death (so bizarrely, if you die, you "get" the cash) whereas in Permanent Life Insurance you not only get a death benefit but also a cash value, some kind of supporting investment, that if you live then you not only get back some of your premiums but you may get even more.

Therefore it might appear that at face value the Permanent life insurance is more valueable because not only do you get the cover in the event of your death, but you also get the investment potential.

In the investment market of today, however, the dual approach is no longer the clear and obvious candidate because investments can go down as well as up, and of course, the cost of permanent life insurance is higher than simple term life insurance - because you are buying two products at the same time rather than just the one.

But it is not as straightfoward as buying one product or two, because the benefits also reflect the investment made. It therefore comes down to looking for what you might need.

Some advisers say that you need to consider how long you might want to keep the term life insurance policy, or the permanent life insurance policy. The longer you invest money, the thinking goes, the more likely the long term return is going to be given the smoothing effect of longer term investments over the ups and downs of the world stock markets and other investment vehicles. But even that is no longer clear with the credit crunch and uncertainty about financial institutions!

Further to this consideration is the amount of the permanent life insurance policy that can be guaranteed; that itself can be a variable which can affect the price and the decision as to whether to take permanent life insurance or term life insurance (or term life assurance) but those debates are beyond the scope of this article.

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