The difference between term life insurance and permanent life insurance is that the term life insurance terminates, but it’s the mot cost effective. Permanent life insurance lasts for the rest of your life and you can grow tax free cash value that you can access while you’re alive for emergencies, vacations, or retirement.
Permanent life insurance can generate a stream of income that you cannot outlive. So how does it work? Imagine two buckets of money. One bucket is your life insurance and the other bucket is your cash value. Some of your premium goes to pay the death benefit and the other part of it goes towards your cash value. Your cash value grows with tax benefits and you can access it during your life.
What many parents do is get permanent life insurance for their infants and save around $150 a month. By the time the child is 18, she/he will have several thousand to use towards college and by the time the child is in her/his 30’s there will be money for a downpayment on a house, and at retirement age, he/she can access over $1 million dollars for retirement!
Why choose term versus permanent? Term is the most cost effective, but it doesn’t generate any cash value. The permanent life insurance does. Generally, depending on affordability and need, you will get a blend of both term and permanent. In many cases, the term life insurance can be converted to permanent.
Everyone needs to get approved for life insurance and the approval can either be “med” or “non-med.” That means you will either do a medical exam with blood and urine sample or not and the insurance carrier will look through your medical history to determine eligibility. If you do have life insurance, have you had a recent look to make sure it’s up to date and that you’re properly insured?