Term vs. permanent life insurance 

Term life focuses on a defined period.

Term life generally provides a death benefit if the insured dies while the coverage is in force during the policy’s term. It generally does not accumulate cash value and often has a lower initial premium than permanent coverage with a comparable death benefit, subject to underwriting.

A term can align with years when dependents need income or a major debt remains outstanding. Ask what happens at its end. Renewal, conversion rights, age limits and future premiums differ by contract; a level premium during an initial period does not mean the same price continues indefinitely.

Permanent life brings a longer commitment and additional features.

Permanent life insurance is designed for long-term protection and generally includes a cash-value component. Keeping the policy in force depends on meeting its terms and funding requirements. The word “permanent” does not mean any premium pattern will keep every policy active for life.

Whole life and universal life, including indexed universal life, have different structures. Whole life may offer contractual premium and value guarantees subject to policy terms; dividends on participating policies are not guaranteed. Universal life adds flexibility but requires careful attention to funding, charges and policy performance.

Cash value is not the same as an unrestricted savings account.

Early values may be limited, and surrender charges or other costs can affect what is available if a policy is ended. Withdrawals and loans can reduce values or benefits and may increase lapse risk. Loans accrue interest, and adverse tax consequences can arise in certain circumstances.

Do not assume beneficiaries automatically receive accumulated cash value in addition to the stated death benefit. The payment depends on the contract and death-benefit option. Ask how the proposed policy treats values, loans and the amount payable at death.

Compare what you can maintain, not just what you can start.

Consider whether the premium is manageable through a job change, business slowdown or other interruption. A larger policy that you cannot maintain may not serve your goal as well as an affordable option that stays in force.

Compare the same protection goal across alternatives. Term, permanent insurance or a combination may be considered, but none is automatically suitable. Avoid reducing a needed death benefit solely to fit a more complex cash-value strategy.

• What amount of protection is needed, and for how long?
• Which premiums and benefits are guaranteed, and under what conditions?
• What happens if premiums are reduced, missed or stopped?
• What flexibility is available if the family’s needs change?
• How does existing employer or personal coverage fit into the plan?

Take extra care before replacing an existing policy.

A new application can involve different underwriting, policy terms, charges and timing. Compare the existing policy before deciding to replace it, and understand the effect of surrendering or borrowing against any existing cash value. Ask whether new contestability or suicide-exclusion periods would apply and what protections or values you could lose.

Do not cancel current protection merely because a new application has been submitted or a quote looks attractive. Confirm the new coverage, review the actual contract and obtain advice on any tax or legal consequences relevant to your situation.