Term vs Permanent Insurance Issue - One Answer to the Great Debate

Life Insurance

I’ve been selling life insurance for 27 years. The question I hear most often is, “what’s better…term insurance or permanent insurance?” Where is the Rosetta Stone of insurance to help solve this riddle? Is it tucked away in an ancient cave guarded by Indiana Jones? I’ve guided customers through the years with a simple 3 question quiz which helps to answer our industry’s biggest puzzle.Try this out and see for yourself:

  1. Is the life insurance coverage amount I seek required for the rest of my life? The rest of my life can be a long time, so too is the guarantee that the life insurance claim check will equal the amount of money my beneficiaries will require.

Answer: YES  NO  MAYBE

  1. Do I have access to the cash each year required to pay the premium for the amount of insurance my beneficiaries will require? Year over year is important if I don’t want my policy to lapse, thus, denying what amount my beneficiaries require.

Answer: YES  NO  MAYBE

  1. Down the road could my health change, thus, making it difficult or even impossible to buy life insurance when I might really need it? Worries about my future health are real especially if some family members close to me have poor family medical history.

Answer: YES  NO  MAYBE

If you answered any of the above questions with a “YES”, then permanent insurance make sense as a product choice for your life insurance. If all three questions are answered, “YES”, then permanent insurance really makes sense as a product choice for you. Why? Because…permanent insurance is permanent…for the “rest of your life”. Once you lock in your premium and insurability, only non-payment of your premium can cancel your policy involuntarily. There are many uses of life insurance needed in later years: paying for inheritance and estate taxes, passing along money for a grandchildren’s college fund, covering debts for a surviving spouse, just to name a few.

If you answered “NO” to any question, then term insurance is a viable product choice when buying life insurance. Need to cover a parent’s life while the kids are in college? Need to cover a mortgage payment for 30 years in case of a premature death? Need to pay for some day care if a SAH parent is lost?: All great uses of term insurance as we protect the periods of your life’s pivotal moments.

If you answered “MAYBE” to any of these questions, then take a look at a term/perm blend of insurance as a solution. (Some insurance companies can combine these into the same policy while others prefer you buy one policy of each. A good agent can price the choices for best value.) For example, say you need to cover a growing family for 20 years and you are also worried about your future insurability because of a family history of diabetes. Further, you calculate your family requires about $250,000 of life insurance to help offset the costs of growing a family while leaving behind a small college fund. Then you look way down the road at life in your 70’s. You and your spouse calculate that having an extra $100,000 could offset any debts still hanging around. I advise the answer is a blended term/perm policy of $250,000 term and $100,000 of permanent life insurance. As a bonus, some term insurance is convertible to permanent insurance in case your future needs really change from your original plan. (Buying both at the same time from the same company might make some sense because it’s only one examination.)

I hope this sheds some light on the “great debate” of which type of life insurance is right for you and your family’s needs. 

About the author: Brian Carroll is the CEO of Pivot Insurance and holds CLU & CPCU designations. He has been part of the life insurance industry for over 30 years. He is also an avid runner and has participated in many athletic endurance events. Brian established the anonymous life insurance quote process here at Pivot and takes pride in the caring and professional staff. You can reach Brian at 1-800-651-1953 or BCarroll@pivot.com.