term life insuranceIf you really compare life insurance policies, they will quickly become clear just how superior term life insurance is over permanent life insurance, for most people. Because the monthly premium amounts for the many variations on permanent life are so much higher than for those of term life, it’s fair to say that term is the way to go if your financial situation is fairly simple.

Since term life policies pay out only if the insured person passes away during the time in which the policy is in effect, you will save a lot on insurance premiums for the same amount of coverage with a permanent policy. There’s a simple reason for this. The vast majority of people who take out term life insurance outlive their policies, so in effect they pay the insurance company for many years without collecting anything back. This enables insurers to keep term premiums low.

This is not to say that you do not want term life insurance in the first place. If you have a family that depends on you and your income for their financial stability, the responsible thing to do is to be insured. In addition, you’ll sleep better knowing that your beneficiaries are taking care of no matter what happens.

With permanent life, which normally does promise a payout amount either upon the death of the insured or his reaching the age of 90 or 100 years, the higher premiums make it very difficult to put extra cash to work in an investment portfolio for yourself. Insurance agents will point to the investment aspects that permanent life insurance often contains, but the fact is that fees and hidden costs will greatly reduce your yearly returns.

Buying as much coverage as you can afford using a good term life insurance policy, and then putting what you can towards investments that are separate from your life insurance is probably a much smarter move. Talk to a financially knowledgeable friend or relative with your best interests in mind, and in all likelihood he will confirm this.

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