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  • Writer's pictureBrett Volpe

The Guide to Term and Permanent Life Insurance

When it comes to ensuring the financial security of your loved ones, life insurance is a pillar of protection that can't be overlooked. However, the landscape of life insurance options can be vast and somewhat complex. At Volpe Financial Solutions, we understand the importance of making informed decisions about your family's future. That's why we're here to guide you through the basics of two primary life insurance types: term and permanent.


Understanding the Basics

life insurance couple

Life insurance serves as a financial safety net, designed to protect your family from unexpected costs in the event of your passing. Whether it's covering funeral expenses, paying off debts, or ensuring your children can afford higher education, the right life insurance policy is a testament to thoughtful planning and care.



There are two main types of life insurance to consider: term life insurance and permanent life insurance. Each offers unique benefits tailored to different stages of life and financial objectives.



Term Life Insurance


Term life insurance is akin to renting an apartment. It provides coverage for a predetermined period—typically 10, 20, or 30 years—with monthly or annual payments. This type of insurance is often more affordable, making it an attractive option for young families or individuals on a tight budget.


young family

Key takeaways:


  • Fixed duration: Coverage lasts for a specific term.

  • Cost-effective: Lower premiums compared to permanent life insurance.

  • No payout if you outlive the policy: The policy expires if you live beyond the term, with no benefits paid out.


Permanent Life Insurance


Permanent life insurance, on the other hand, is like buying a home—it's with you for life. While premiums tend to be higher, the policy covers you indefinitely, offering peace of mind regardless of future health changes. Some policies also feature an investment component, allowing the cash value of the policy to grow over time. If needed, you can tap into this cash value or even cancel the policy to access the funds.


couple meeting

Key takeaways:


  • Lifelong coverage: Protection that lasts a lifetime.

  • Higher initial cost: Premiums are higher but offer continuous coverage.

  • Investment potential: Some policies accumulate cash value that can be accessed during your lifetime.



Making the Right Choice


Choosing between term and permanent life insurance depends on your personal situation, financial goals, and what you hope to achieve with your policy.

  • Consider term life insurance if you're looking for affordable coverage to protect your family during critical years, such as while paying off a mortgage or raising children.

  • Consider permanent life insurance if you're interested in lifelong coverage with the added benefit of building cash value that can serve as part of your retirement strategy.


 

Common Questions:


  1. How long does a life insurance policy last? Permanent life insurance provides coverage for as long as you’re alive, regardless of age or health status. Term life insurance covers you for a specific period, known as a term, such as 10, 20, or 30 years. As you age, term insurance may be more challenging to qualify for and more expensive to buy.

  2. What do life insurance premiums pay? With both types of policies, you’re entering into a contract with an insurance company to pay the death benefit you’ve agreed on if you die while the insurance coverage is in force. This death benefit can range from $25,000 to $25 million, depending on your selected coverage level.

  3. Is my life insurance policy considered an investment? In addition to the guaranteed death benefit, some permanent insurance policies, such as Universal Life and Whole Life, include an investment component. This component, called the embedded cash value, grows without being taxed yearly. You can use the cash value as an emergency fund by withdrawing or borrowing against it before the person insured under the policy passes away. If you withdraw or borrow from the policy, some income tax might be payable.

  4. Will my beneficiaries need to pay taxes? When the person insured under the policy passes away, the beneficiary will receive a lump sum death benefit that isn’t taxable.


 

At Volpe Financial Solutions, we're dedicated to helping you navigate these choices, ensuring you find the life insurance plan that best suits your needs and goals. Our team of experts is here to provide personalized advice, helping secure your family's future with the right mix of coverage, care, and foresight.


Remember, investing in life insurance is not just about protecting against the unknown—it's a strategic step towards providing long-term stability and peace of mind for those you love most.






Disclaimer: 

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was written by Brett Volpe], for the benefit of Brett Volpe, Financial Advisor with Volpe Wealth Management, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. 


Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.


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