Advantages of Buying Term Life Insurance vs Permanent Insurance

Choosing between Term life and Permanent life is a choice that can be confusing. Even with the sound advice of a reputable financial advisor, ultimately, the best choice is to go with the insurance plan that is best suited to your needs and the needs of your family. However, there are some financial advantages in going with a Term life insurance policy.
Term Life versus Permanent Life Insurance
Term life insurance is popular for its inexpensive premiums. This "pure" insurance simply pays out a benefit upon your death. You choose the face value and amount of years you would like your "term" to be. Pay your premiums and your survivors will either be paid upon your death or you will outlive the policy. At that time you can either choose to renew, convert or donate your Term life insurance policy. There is no cash value. It is simple and to the point. While some feel like Term life insurance is a waste if you end up not needing it, others view it as a financial advantage because you can use the money you save on a cheaper policy and invest it elsewhere.
Permanent life insurance comes in many forms and offers different advantages depending on the type of policy you choose. Permanent insurance essentially acts as a savings vehicle, which allows the insured to tap into the liquid funds as a non-taxable loan when needed. Premiums for these types of life insurance are substantially more. With a permanent policy, you build guaranteed cash values. The long-term cash value of permanent life could accumulate to significant sums. Additionally, as an owner of permanent insurance, you are eligible for dividends, if and when they are declared by the insurance company. These dividends may be applied to purchase paid-up additional insurance, which can increase your overall coverage with no additional out-of-pocket expense. Last, Permanent life insurance has another key tax advantage: the proceeds that flow to beneficiaries are generally free from federal income tax.
So Why Choose Term over Permanent Life Insurance?
Term life insurance is really a good choice for those who may have limited funds and few responsibilities. Usually younger people choose term life because they have a lower risk of dying any time soon. Younger investors feel that they can have the best of both worlds: coverage for themselves and their young families while also being able to use the money they save on cheaper insurance on other investments or assets.
Term life insurance serves as a short-term solution for many. Later, as life changes occur and more assets are accumulated, the term policy can always be converted to permanent insurance. In the mean time, Term insurance seems to be the most practical as you have financial protection in the unlikelihood that you prematurely die, but you do not have to sink hundreds of dollars into an account that you cannot tap into for several years.
Other Vehicles to Invest your Money
Some individuals are diligent about investing the money they "save" by choosing term life insurance over permanent life insurance. Some of the other vehicles for investment are: mutual funds, individual stocks and bonds and CD's. Just be sure to consult with your tax consultant or financial advisor to measure each of the advantages and disadvantages that come with each type of investment.
Sharon Taylor writes life insurance and other topics about family financial management for eQUOTE Life Insurance, a leading Internet resource for life insurance rates, no-obligation quotes and resource information.