If you're looking for life insurance, then you may have come across two rhyming policies known as term and perm. When it comes to distinguishing between the two of them, there are a few key details that you should know. Here's how they differ, so you can get a better sense of the right option for you.
The Deadlines of Term Policies
Term policies are life insurance policies that, theoretically, the beneficiaries might never be able to claim. So, if you wanted to provide for dependent children only up until a certain age. Then, you might take out a term policy that expires when your youngest child turns 18. If your dependents need to claim the policy, they can do so only if a qualifying event happens when the policy is active. If not, the policy expires at the end of the term and is never paid out.
Term Insurance, Also Called Pure Insurance
The term pure references the fact that there is no cash value accumulation for term policies. This is a great benefit if you have a certain set of expenses you want to meet.
However, one of the added benefits of permanent as opposed to a term policies is that you often have the option of letting the policy accumulate cash value over time. Over time, you can often choose to cash in the cash value part of the policy, essentially using it as a savings account or source of income.
How to Decide
Plenty of people use life insurance to expand their portfolios and give them extra income should unexpected events occur. For example, maybe you didn't foresee yourself having to pay for a grandchild's education, but circumstances change. Or maybe you need to pay for major home renovations so you can continue to stay there. Some people may just decide to take a major vacation down the line. Whatever happens, permanent insurance can be a good way to keep some pennies store up for a rainy day.
There is no right and wrong type of insurance to get, only those that are right for you. If you choose term life insurance, you're getting an affordable policy that's designed to your specifications. A permanent life insurance plan may just give you more options and assets to draw from should you need to. It all comes down to how you want to manage your funds while protecting the people you love.