Term insurance or permanent insurance? Many people struggle over which type of life insurance makes sense for their situation. The difference comes down to cost. Some experts question why you should pay for an expensive permanent policy when you could buy a much more affordable term policy.
With the savings, you could invest in a mutual fund, annuity, stocks, bonds, or other investment vehicles. The idea is that investing that “difference” (or premium savings) would replace or exceed the cash value accumulation of the permanent insurance.
If you decide this strategy is right for you, seriously consider what best suits YOUR objectives and circumstances. Think about this:
- You may not have the discipline to invest the difference.
- Suppose you need to renew or reapply for your term policy. In that case, the cost may become prohibitive as you get older or develop health problems.
- If health problems occur, you could become uninsurable and be unable to purchase additional term insurance later.
- The difference between your term insurance premium and your permanent insurance premium can be substantial. To make it worth it, you must invest the difference consistently over time.
- The investment you choose may not perform as you hoped.
Be sure to review the benefits, risks, product features, and any current or future charges associated with any insurance and investment product. When in doubt, schedule time with a professional who can help you sort through your options and ultimately make the decision that’s in your best interest.
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