When you have loved ones who depend on you, being prepared for the unexpected is a top priority. Life insurance provides peace of mind by creating a financial cushion to cover income loss, childcare, debt payments, and funeral expenses. Two of the main types of coverage are permanent and term policies. Each has distinctive benefits, and the following guide highlights the differences between these policy types.

Term Life Insurance

The “term” refers to the time frame of the life insurance plan. Policies are typically available in terms ranging from five to 30 years. You pay your premiums, and once the term ends, you can renew, request a different term, or walk away from the policy. 

If the policyholder dies, death benefits are paid to the individuals named as beneficiaries. The payouts are contingent on whether the insurance premiums were up to date, and that the policy’s term did not expire. Because term life does not accumulate cash value, withdrawals are not permitted while the policyholder is still alive. 

One of the main benefits of this type of coverage is the younger you are when securing a policy, the lower the premiums will be. The rates also remain fixed for the term. Depending on the insurance provider, rates will vary if you choose to renew with the same term or select a different one.

Permanent Life Insurance

When you sign up for permanent life insurance, the policy is created to remain in place for a lifetime. There is no expiration date unless you decide to cancel coverage. The carrier can also issue a cancellation if premiums are not paid. 

Like term life, death benefits are distributed to beneficiaries after the policyholder dies. However, permanent life insurance builds cash value for as long as the premiums are paid. You will typically be able to borrow against your policy or cash in the full amount at any time. The amount borrowed or cashed in will reduce how much will be available in death benefits to your beneficiaries. The funds can also be used as you see fit. 

Permanent life insurance is generally available in three types: universal, variable, and whole. Universal is linked to an interest-bearing account with the flexibility to change your premiums and death benefits. Variable coverage offers access to a wide range of investment options. Whole life may distribute dividends to policyholders. 

Financial Strategies Group DBA Arlene Lear Insurance understands the importance of having protection in place for you and your loved ones. Experienced agents at the Bolivar, MO-based firm take the time to listen to your unique needs so that you have access to customized life insurance. The agency works with several leading providers, including Grinnell Mutual. To learn more about coverage options, call (417) 777-3000 in Bolivar or (417) 754-8377 in Humansville. Visit their website for more information.