A Comparison: Term and Permanent Life Insurance | RMI 4310, Study notes of Introduction to Business Management

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| A Comparison: Term and Permanent Life Insurance The following points can help you determine if term or permanent life insurance best suits your needs. Advantages 1 Initial premiums generally are lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest. It's good for covering needs that will disappear in time, such as mortgages or car loans. Disadvantages (| Premiums increase as you grow older. 0 Coverage terminates at the end of the term Renewal may be too expensive or you may no longer qualify. a There are no cash values. Advantages 0 As long as the premiums are paid, protection is guaranteed for life. (| Depending on the policy, premium costs can be fixed or flexible to meet personal financial needs. (| The policy accumulates a cash value against which you can borrow (loans must be paid back with interest or your beneficiaries will receive a reduced death benefit). You can also borrow against the policy’s cash value to pay premiums. The policy’s cash value can be surrendered, in total or in part, for cash or converted into an annuity (an insurance product that provides an income for a person’s lifetime or a specific period). 0 A provision or rider can be added to a policy that gives you the option to purchase additional insurance without taking a medical exam or having to furnish evidence of insurability. Other options, such as reduced paid-up insurance or extended term insurance, are also available. Disadvantages Required premium levels may make it hard to buy the amount of protection needed. LIFE, the Life and Health Insurance Foundation for Education, is a nonprofit organization dedicated to educating consumers about the essential role of insurance within a sound financial plan. For more information about insurance, visit LIFE’s Web site at www.life-line.org, or call 1-888-LIFE-777 for a free brochure.