Permanent or Term insurance?

Permanent life or Term insurance, which is better? This is a question that most people who are considering life insurance are bound to ask. Predictably, there is no one answer to this. Whether you opt for Permanent or Term really depends on your requirements.

Permanent life insurance

Permanent life insurance often seems less attractive when compared with Term insurance. It is more expensive to purchase and it will be some time before it accumulates any significant cash value. However, it does have its advantages.

Permanent life insurance has the following advantages:

• It lasts your entire life.
  
  
• It is a form of investment, because a portion of your premium is invested.
  
  
• Savings under Permanent life insurance get tax benefits.
  
  
• Permanent life insurance is good for people who do not have a sound savings plan.
  
  
• It can especially serve people in their old age when they don’t have a regular income, especially if they have dependents at this point.

Though Permanent life insurance may pay dividends in old age, it has withdrawal and tax penalties for early conversion, as well as very low return rates. For this reason, you should not bank heavily on its returns, especially in your younger years. Remember to think of it only as an insurance policy and not as an investment vehicle.

Term life insurance

Term life insurance is generally considered by younger people when they have dependents to look after, but not much savings. This is because they have much lower premiums and can afford a high coverage when they need it the most.

Term life insurance is especially good because:

• It is highly affordable and allows you to go in for the coverage you feel you require.
  
  
• Term life Insurance policies are renewable.
  
  
• It allows you to buy a policy for a fixed period of time, when you actually have dependents and not much savings.
  
  
• Lower premiums allow salaried people to simultaneously adopt other investment plans to secure their future.