Now for the big guy… Permanent Life insurance. There are several types a few being Whole Life, Universal Life, etc….  Here is the Wikipedia definition. I like it the best as it is simple and clear. Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value.

This is compared with Term life insurance where insurance is purchased for a specified period (typically a year, or for level periods such as 5, 10, 15, 20 even 25 and 30 years) where a death benefit is only paid to the beneficiary if the insured dies during the specified period.

Permanent life insurance originally was offered as a fixed premium fixed return product known as whole life insurance also known as cash surrender life insurance. This offered consumers guaranteed cash value accumulation and a consistent premium. Consumers later wanted more flexibility which was offered in the form of universal life insurance. Universal life insurance allows consumers flexibility in when premiums are to be paid and the amount that they would be. Universal life policies also allowed consumers to permanently withdraw cash from the policy without the interest associated with the loan provisions in whole life policies. Universal life policies retained the fixed investment performance of whole life policies.  

 Payout likelihood

Because permanent life insurance programs are designed to be permanent and pay a death benefit, the cost of insurance is considerably higher than term insurance. Term insurance is referred to as pure death benefit with no cash accumulation vehicle tied to it. Because of this, permanent premiums remain 8 to 10 times more expensive than term premiums for the same coverage.^{[citation needed]} Most people are drawn to term insurance for the low cost and the ability to invest the difference in separate financial products. Doing so has a potential drawback in some cases because all term policies eventually expire and the client would then have to pay a higher premium based on his attained age or he may not be able to qualify for a new policy at that point. In these situations, money earned from investments may not measure up to the coverage the policy would have provided.^{[isputed_statement" title="Wikipediaisputed statement">dubious – ermanent_life_insurance#Dubious" title="Talkermanent life insurance">discuss]}

TERM LIFE INSURANCE

I am constantly asked how term insurance works and if is it the right life Insurance to buy.   As complicated as some agents make buying life insurance sound (to justify their means) it really is very simple. Not to bore you but we need to talk about the basics for just a moment. Term life Insurance comes in renewable yearly amounts. For ex: 1yr./10yr./15/yr./20yr. etc...Your premium stays level for the amount of years you choose and then you need to buy a new term of years at that age and the health you’re in. Buying term Life Insurance is just like leasing a home. You pay your monthly premiums each month. If you die you receive benefits if you do not die you have nothing to show for the years you had it. Depending on several factors this isn't always bad. The answer is very simple. For those of you who are considered wealthy you need to buy Universal Life Insurance or some form of permanent Life insurance because you know you will have an estate in your later years and since life Insurance is one of the least expensive ways to pay your estate taxes, then it's a no brainer. Plus your financial planners most likely will push you to buy this type of Life Insurance because they love the big commissions. And in most cases it really is the right thing to do. For you and me the average Joe, it's even simpler. Check your budget. If in the future things tightened up because the kids go into sports, you buy a new car, your lease payment or mortgage payment goes up and your life Insurance would be the first thing to go, then Term Life Insurance is for you. Remember depending on your age, health, smoker/non-smoker/face amount etc...Your premiums can range as low as $15.00 to $50.00 a month. Where as a form of permanent life insurance could cost $50.00 to $250.00 a month. (See permanent life insurance for more details) To summarize, I could not possibly cover every situation to make a recommendation on my blog but I can give you a few rules of thumb.

 

1.       If you are financially liquid (plenty of spending money each month) and you know it’s going to be this way for several years then a permanent form of Life insurance is right for you.

2.       If your budget varies and you have rough months and you don’t know where your future is going than Term Life Insurance is for you.

I don’t care who you are, if you cannot pay the premiums, you’re going to lose all the money you put in and you will have nothing to show for it. DO NOT GET YOURSELF IN THIS POSITION!

Over the years I have seen so many families that could barely pay their bills because some agent sold them a $200. a month life insurance policy they could not afford.

 

For those of you who need a true definition here is the Wikipedia definition:

Term life insurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is often the most inexpensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis.

Term life insurance is the original form of life insurance and can be contrasted to permanent life insurance such as whole life, universal life, and variable universal life. Unlike permanent life insurance policies guarantee coverage at fixed premiums for the lifetime of the covered individual. Additionally, many permanent life insurance products build a predetermined cash value over the life of the contract available for later withdrawal by the client under specific conditions.

Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired, and does not expect a return of Premium dollars if no claims are filed. As an example, auto insurance will satisfy claims against the insured in the event of an accident and a home owner policy will satisfy claims against the home if it is damaged or destroyed by, for example, an earthquake or fire. Whether or not these events will occur is uncertain, and if the policy holder discontinues coverage because he has sold the insured car or home the insurance company will not refund the premium. This is purely risk protection.

Welcome everyone,
We are excited about our new blog. The mission of our blog is to allow the consumer to read and learn about making decisions on purchasing health, disability and life insurance. All our advice will be based on common sense and not the boring traditional statistics and facts. We will give you information that will allow you to make a smart, affordable buying decision based on your own specific situation. Please pass our blog onto all your friends and associates so our blog becomes well known and many consumers will benefit. Feel free to e-mail me (Steve) your questions and I will be glad to anwer them.