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Term insurance provides protection for a specific period of time. It pays a benefit only if you die during the term. Some term insurance policies can be renewed when you reach the end of the term, which can be from one to 30 years. The premium rates increase at each renewal date. Many policies require that you present evidence of insurability at renewal to qualify for the lowest rates.

The following points can help you determine if term insurance best suits your needs.

Advantages

• Initial premiums generally are lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest.
• It’s good for covering needs that will disappear in time, such as mortgages or car loans.

Disadvantages

• Premiums increase as you grow older.
• Coverage may terminate at the end of the term or become too expensive to continue.
• The policy generally doesn’t offer cash value or paid-up insurance.

Permanent insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. If you don’t intend to keep the policy for the long term, this may be the wrong type of insurance for you.

Most policies have a feature known as cash value or cash-surrender value. This feature, not found in most term insurance policies, provides you with some options:

• You can cancel or surrender the policy in total or in part and receive the cash value as a lump sum. If you surrender your policy in the early years, there may be little or no cash value.
• If you need to stop paying premiums, you can use the cash value to continue your current insurance protection for a specified time or to provide a lesser amount of protection covering you for your lifetime.
• You usually can borrow from the insurance company, using the cash value in your life insurance as collateral. Unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit.

With all types of permanent policies, the cash value of a policy is different from the policy’s face amount. The face amount is the money that will be paid at death or policy maturity. Cash value is the amount available if you surrender a policy before its maturity or your death. Moreover, the cash value may be affected by your insurance company’s financial results or experience, which can be influenced by mortality rates, expenses, and investment earnings.

There are many different types of permanent insurance:

• Whole life or Ordinary life
• Adjustable life
• Universal life
• Variable life

The cash value of a variable life policy is not guaranteed and the policyholder bears that risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance.

Some policies guarantee that death benefits cannot fall below a minimum level. There are both universal-life and whole-life versions of variable life.

The following points can help you determine if permanent insurance best suits your needs.

Advantages

• As long as the premiums are paid, protection is guaranteed for life.
• Premium costs can be fixed or flexible to meet personal financial needs.
• The policy accumulates a cash value against which you can borrow. (Loans must be paid back with interest or your beneficiaries will receive a reduced death benefit.) You can borrow against the policy’s cash value to pay premiums or use the cash value to provide paid-up insurance.
• The policy’s cash value can be surrendered, in total or in part, for cash or converted into an annuity. (An annuity is an insurance product that provides an income for a person’s lifetime or a specific period.)
• A provision or rider can be added to a policy that gives you the option to purchase additional insurance without taking a medical exam or having to furnish evidence of insurability.

Disadvantages

• Required premium levels may make it hard to buy enough protection.
• It may be more costly than term insurance if you don’t keep it long enough