Should Seniors Get Term Or Permanent Life Insurance?

But if you're choosing to go this route, you may be unsure about whether you should get term or permanent life insurance. In this article, we'll explain how each type of life insurance policy works, then show you how to pick the best life insurance quote for your needs.

What is term life insurance?

Term life insurance is a type of life insurance policy that provides coverage for a fixed period, usually 10 to 30 years. If you die during the policy term, your insurer will pay the death benefit to your beneficiaries. But keep in mind that if you outlive the policy term, you'll need to buy a new policy to continue your coverage. Term life insurance tends to have more affordable premiums than permanent life insurance.

What is permanent life insurance?

Permanent life insurance offers guaranteed lifelong coverage as long as you stay up-to-date on your premium payments. Additionally, a portion of each premium payment goes into a cash value growth component. Your cash value grows tax-deferred at a specific rate that varies by policy type. Once you've built up enough cash value, you can:

• Withdraw from it: Withdrawals may reduce your death benefit and be taxable.
• Borrow against it: You can get a low-rate loan with no credit check or due date. Interest is added to your outstanding balance, and the loan can't grow larger than the remaining cash value or your policy will lapse.
• Pay premiums: Some permanent life policies let you pay premiums with your cash value.
• Surrender your policy: If you surrender your permanent life policy, you'll get your cash value minus any surrender charges.

There are several kinds of permanent life insurance, including:

• Whole life insurance: Whole life policies come with fixed premiums and a death benefit. The cash value grows at a fixed, guaranteed interest rate.
• Universal life insurance: This type of life policy has an adjustable death benefit and premiums. The cash value grows based on current interest rates, and you may be able to pay premiums with it.
• Final expense insurance: Final expense insurance is a small whole life policy with a death benefit large enough to cover end-of-life costs, like funeral expenses. This policy can be cheaper and easier to qualify for than whole life, but has a smaller death benefit. The cash value grows at a fixed, guaranteed interest rate.
• Variable life insurance: Similar to whole life insurance, variable life insurance has level premiums and death benefits throughout the duration of the policy. You can invest your cash value in stocks, bonds, and other securities for more potential growth, but you aren't protected by a minimum rate guarantee.

How to choose between term and permanent life insurance for seniors

Term and permanent life insurance can each work well for seniors in different situations. If you want to create a financial cushion for loved ones, cover mortgage payments, and save on premiums, a term life policy might be the way to go. Since policyholders typically pay less in premiums for these types of plans compared to whole life insurance, you'll have more funds available for other expenses if you choose to go this route.

But paying for a permanent life insurance policy may be worth it if you want guaranteed lifelong financial protection for your loved ones. You won't have to worry about renewing your policy if you live for a long time after you buy it. Permanent policies can also be great tools if you have complex financial plans thanks to the cash value component, which can potentially help you grow your wealth.

Ultimately, seniors need to evaluate their budget, factors that may impact life expectancy, and life insurance needs before deciding on a policy type. Then, they should seek out several life insurance quotes to get a policy that meets their exact needs.