Comparing Term And Permanent Life Insurance

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When it comes to life insurance, there are two general types: term life insurance and permanent life insurance. Term life insurance is a type of insurance that covers financial needs of the life insured upon the death of the life insured during a specific time period, whereas permanent life insurance provides lifelong protection. While the term insurance and permanent insurance are similar in their general form, they differ regarding their time period, the amount of premiums and cash value.

One similarity between term and permanent insurance relates to the form of life insurance. Both term and permanent insurance are a contract between an insured and an insurer, where the insured pays a sum of money regularly to the insurer and the insurer makes a promise to pay out claims to a designated beneficiary upon the death of the life insured in order to cover financial loss. Similarly, the amount of coverage paid out to the beneficiary is guaranteed. …show more content…

Term life insurance offers a temporary protection from the financial loss of death, meaning that the policy expires after a certain period such as 10, 15, 20 or 30 years. The policyholder can choose to renew the contract regardless of the insured’s health at the event of expiration. On top of that, term life insurance is convertible, which allows the owner of the policy to convert from term life insurance to permanent life insurance without proof of health condition. In contrast, permanent life insurance is designed to provide coverage in a lifelong period, which means the permanent life policy never expires. The policy will remain in force as long as premiums are paid on time, guaranteeing the payout of death benefit no matter when the calamity occurs. Nonetheless, permanent life insurance policies are not convertible, which is different from term life insurance

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