The Great Debate - Term v. Permanent Life Insurance

My last two posts have been kind of lengthy. So today we are going to keep it short and sweet.

I am an adjunct college instructor because I enjoy teaching. It is a challenge to explain complex concepts to recent high school graduates who have no "real world" experience. The essential skill for teaching young college students is to first get them to master the basics - the most essential concepts - and build from there. Let us take that same approach to the classic debate, what is the best type of life insurance? Here are the essential concepts:

• The best life insurance policy is the one that is in force when you die.
• The only reason to buy life insurance is for the death benefit.
• All life insurance can be classified into two categories... IF you die and WHEN you die.
• IF you die insurance includes all term insurance, and any other life insurance which can not be GUARANTEED to be in force forever.
• WHEN you die insurance includes any policy which can be GUARANTEED to be in force on the day you die.
• Everyone should own some IF you die insurance and some WHEN you die insurance.
• The only absolute rule is there are no absolute rules.
• When analyzing life insurance, forget the projections and focus on the guarantees.
• I project you will live a long life, but I can guarantee you will die someday.

That's it, the core of selecting the best type of life insurance. We can make this more complicated but we really do not need to. This should answer (or at least clarify) a lot of questions people have about life insurance.

Photo on Flickr by southtyrolean

Comments

[Adam Steen]

Alright! As a former insurance agent, I have to comment!

I agree with all of your points. Good stuff. I always approached it and still do as, "don't let your death create havoc for everyone else."

Right now, I have a small permanent policy to ensure my burial and a term to cover my mortgage and other small debts. Not sure if that's the way to go but I know that when I go my brother and sister will have a fully furnished house and a sweet truck! Oh and I will be buried in a pine box.

[Scott McGregor]

Now...that quick overview sounds familiar. It is the same advice you gave us when we met the first time. I am glad to see you aren't waffling:-) In all seriousness, it really is that basic of a decision to make. Get some of both and you can rest easy at night for your family no matter when the gauranteed part of dying occurs.