Term Insurance Vs. Permanent Insurance

You have probably heard that you should buy Term Insurance because it is cheaper than Permanent Insurance.

Term Insurance, as the name implies, is for a specific period (i.e. 10, 20 years), or up to a certain age. At the end of that period the policy terminates, or you may be given the option to renew it for a further period, or to convert it to a permanent policy. It is important to note that many Term policies cannot be renewed after a certain age, and that every time a policy is renewed the premium increases, based on current age. So, how much are you really saving by choosing Term over Permanent?

Term insurance is ideal to cover mortgages or credit card balances, but if you want insurance coverage for lifetime permanent insurance should be considered.

Permanent insurance products include Universal and Whole life policies. The premiums start out higher than Term policies, but remain the same throughout the contract.

Whole life policies accumulate cash values, which can be used to
(a) purchase a paid-up policy if you become financially stressed
(b) obtain a policy loan
(c) secure a loan, through a collateral assignment

With Universal Life policies there is flexibility where premiums are concerned. You can pay more than the minimum required and decide how you want the excess premium invested.

Remember, insurance is not a one-size-fits-all deal so, get the facts and choose the kind that best suits your needs.


Pauline Bourne, F.L.M.I.
Your Finance & Family Consultant,