Term vs. Perm
Term Life Insurance Coverage
Term provides life insurance protection for a specified period of time. The typical term periods offered are 10, 15, 20, and 30 years. Term Life insurance pays a federal income tax-free death benefit* to the beneficiaries if the insured dies during the specified time period.
- Lower Premiums
Term life insurance is generally less expensive than permanent life insurance which can be important for people and families on a tight budget.
- Convertibility
Many, but not all, term life products offer a conversion provision. This provision allows the policy owner to convert their term life insurance policy into a permanent life insurance policy with no further proof of insurability. A conversion feature can be valuable because as your life changes, so do your life insurance needs.
- Renewability
After the initial term period is reached, many term policies have the option to renew coverage with no further proof of insurability, but at higher annual premium rates
- Doesn't Carry a Cash Value
Unlike permanent insurance products, term life insurance products do not accumulate cash value.
Permanent Life Insurance Coverage
Permanent life insurance products provide you with life insurance protection for your lifetime. Just like all other life insurance products it pays a federal income tax-free death benefit to the beneficiaries if the insured dies while the policy is in force.*
- Flexible Premium Payments
Certain permanent life insurance products offer flexible premium payments. This feature allows you to potentially increase, decrease, or even skip payments during the life of the policy, if the policy value is sufficient to cover the monthly deductions.**
- Tax Advantages
Life insurance contracts meet specific IRS requirements that make them eligible for favorable tax treatment.
- Tax Deferred Cash Value Component
All permanent life insurance products have a cash value component. After monthly deductions are taken, net premiums may be allocated to a fixed account, an index account or subaccounts depending on what type of life insurance policy is purchased. Index universal life insurance policies offer a fixed account as well as an index account in which interest is credited, based in part, on changes in an external index. Variable universal life policies offer a variety of subaccounts or investment options to which a policy owner can direct net premiums based on their individual risk tolerance and investment goals. The return and principal value of the subaccounts will fluctuate and may lose value. Taxes are not paid on any gains in the policy during years in which they are earned or while they remain in the policy.
- Tax Favored Living Benefits
A portion of the cash value of permanent life insurance products can be accessed through tax advantaged policy loans and cash withdrawals, if the net surrender value is sufficient.**
* IRS SEC. 101(a)(1) and IRC Reg 1.101-1
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