A vehicle that helps you build predictable, safe, tax-efficient wealth for the rest of your life.

Term vs. Permanent Life Insurance

Term life insurance differs from permanent life insurance in several ways but tends to best meet the needs of most people looking for affordable life insurance coverage. Term life insurance only lasts for a set period of time and pays a death benefit should the policyholder die before the term has expired. Permanent life insurance stays in effect as long as the policyholder pays the premium. Another critical difference involves premiums—term life is generally much less expensive than permanent life because it does not involve building a cash value.

Before you apply for life insurance, you should analyze your financial situation and determine how much money would be required to maintain your beneficiaries’ standard of living or meet the need for which you’re purchasing a policy. Also, consider how long you’ll need coverage for.

For example, if you are the primary caretaker and have children 2 and 4 years old, you would want enough insurance to cover your custodial responsibilities until your children are grown up and able to support themselves.

You might research the cost of hiring a nanny and a housekeeper or using commercial child care and cleaning services, then perhaps add money for education. Include any outstanding mortgage and retirement needs for your spouse in your life insurance calculation. Especially if the spouse earns significantly less or is a stay-at-home parent. Add up what these costs would be over the next 16 or so years, add more for inflation, and that’s the death benefit you might want to buy—if you can afford it.