Life insurance policies are available to consumers in forms of permanent or term life policies. Each form offers consumers multiple options to choose from. Permanent options include whole life and a variety of universal life options, while term options include renewable, decreasing, or convertible policy structures. Regardless of type, all policies have at least one thing in common – premiums! These, too, vary according to policy type and structure. For example, whole life premiums can be amortized any number of unique ways. Payments can be made over the life of the policy or in fewer increments, such as a 10 pay whole life premium structure, wherein the entire policy is paid for in just ten payments!
Choosing the Right Policy and Right Premium Structure
Permanent and term life policies are radically different. While permanent policies offer coverage for the entire life of the policyholder, term policies limit coverage to the number of years contractually specified as the “term”. Permanent policies accumulate cash value in relation to premiums paid and can even earn interest. A shorter premium payment structure might allow more time to invest in the cash value. Term policy premiums are typically amortized over the life of the term, which may be a little as one year for renewable term policies.
It’s important to understand your life insurance options. Permanent or term life insurance, or combinations of the two are strategic ways to ensure your family’s financial future.