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Term Or Permanent There are two categories of Life Insurance, term life insurance (short term) and permanent life insurance (long term). Often, the solution is a combination of both, since most people have a need for both temporary (term insurance) and lifetime (permanent insurance) protection.
To help you decide, consider five basic factors:
- Duration of coverage
- Cash value
- Net cost of insurance
Term life insurance provides a death benefit for a stated period of time. Duration of Coverage The longer period of time that insurance protection is needed, the more consideration you should give to permanent life insurance.
For short-term needs, term life insurance may be appropriate.
Examples of permanent needs are:
- Use of death benefit to pay final expenses
- Use of death benefit to provide money for a favorite charity
- Use of death benefit to pay estate taxes
- Fund a business buy/sell agreement or provide key person protection
- Use of death benefit to pay off home mortgage
- Use of death benefit to pay off a loan
Permanent life insurance premiums are generally level and payable for life.
Permanent life insurance accumulates cash values:
- Term life insurance does not accumulate cash values, nor does it earn dividends.
Copyright © 2009 Joseph Eid.
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