As part of Life Insurance Awareness Month, let’s look at the question of whether you should get term or permanent (perm) life insurance.
Actually, you may want to have components of both. That’s because term components should make a transition to perm, and avoid slipping back to term.
We need to rethink what permanent life insurance is. To have permanent life insurance, there needs to be values that persist. The permanent portion should be cash value or another internal value that does not decrease unless distributions are taken. The premium or total benefit may need to be adjusted from time to time to allow for this permanent value.
Term life insurance typically has no cash value and only pays a benefit at death. In today’s market, term life typically focuses on 10 to 30 years of coverage with a level premium during these years. After the level premium years, the policy premiums jump up to annual renewable term (ART) rates that increase each year. Term life insurance is also provided with low ART premiums at policy issue, but these rates increase steadily and become quite high in retirement.