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Comparing Permanent And Term Life Insurance

Life Insurance policies fall into just two basic categories: term and permanent. Understanding the differences between these two will help you analyze any policy that's offered to you. Once you've decided whether term or permanent is right for you, the other policy features are easier to understand and assess.

A Term life insurance policy provides you coverage for a stated period of time – typically 10, 15, 20, or 30 years. If you die during that period, the insurance company pays your beneficiary the death benefit. If you don't die during the term, no benefit is ever paid out.

Because the insurance company's liability is limited and there is no cash value benefit, term is the most economical kind of life insurance to purchase.

A Permanent Life Insurance policy lasts as long as you pay the premiums. You could have life-long coverage (or at least until you're 100). Whole Life, Universal Life, Variable Life – they're all forms of Permanent Life Insurance.

A distinguishing feature of permanent policies is their cash value. Part of the premium you pay covers your insurance, and part of it goes into a cash fund.

At SelectQuote, we specialize in term life insurance. Here's why:

  • Term is economical. For many families, it's the only way to afford the large amounts of coverage they need.
  • Term lasts as long as you need it to. You may have a long-term need (e.g., until your new baby finishes medical school). Or you may have a short-term need (e.g., five more years until your kids are on their own). You pay premiums only when you need the protection.

Most term policies include a conversion right. This provision lets you turn in your term policy for a permanent policy, enabling you to get coverage during your younger years at far lower premiums with the option of converting to Permanent Insurance if your health takes a turn for the worse.

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