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Types of Life Insurance
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In a nutshell, Life insurance comes in two flavors: Term and Permanent. The best analogy is viewed as renting or owning the coverage.
RENT OR BUY ?
Term Life Insurance
Term Life insurance provides the greatest amount of coverage for the lowest initial cost so it is a good choice if your needs are temporary or your funds are limited. Since term insurance provides coverage for a specific period of time (the "term"), you will have to choose the number of years you will need coverage.
The Company pays a death benefit only if you die during that term. Some term insurance policies can be renewed at the end of the term. Premium rates may increase at each renewal date. Term insurance is useful as coverage for responsibilities that will diminish or end over time, such as mortgages or car loans.
Permanent Life Insurance.
Permanent Life insurance coverage is useful when you anticipate a long-term need and value the option of income-tax-favored accumulation for future needs. The accumulated value can be borrowed against and, in some cases, withdrawn to help meet future goals. (Of course, accessing your accumulated value may reduce your death benefit). As long as you pay the necessary premiums, there is no time limit (or term) restriction on the availability of your death benefit.
