Many people struggle over which type of life insurance makes the most sense for their situation, term insurance or permanent insurance. The difference between the two comes down to cost. Some experts will question why you should pay for an expensive permanent policy when you could buy term (which is way more affordable). With the savings, you could invest in a mutual fund, annuity, stocks, bonds, or other investment vehicles. The idea is that investing that “difference” (premium savings) would replace or exceed the cash value accumulation of permanent insurance.
If you decide if this strategy is right for you, you need to consider what best suits YOUR objectives and circumstances seriously. 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 not even purchase term insurance when renewing your policy.
- The difference between your term insurance premium and the amount of the premium for your permanent insurance is substantial. It would be best if you had the discipline to invest the difference and invest early. You will need to make up for the dramatic increase in term insurance costs at later ages.
- The investment you choose may not perform as you hoped.
Please make sure to weigh your knowledge about your habits carefully. Also, be sure to review the benefits, risks, product features, and any current or future charges associated with any insurance and investment product before deciding how to address your particular needs. When in doubt, schedule time with a professional because they can help you sort through all your options and ultimately make the decision that will be in your best interest.