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Life insurance can be categorized into two basic types.  Term (Temporary) or Perm (Permanent) insurance.  Term insurance means when insurance is brought for a period of time, normally 10, 20, or 30 years.  Permanent insurance is where someone can keep the insurance policy in force so long as they paid the premiums.  There is no expiration date.  So which type is the best?

The easy answer is whichever fits your circumstances.  The best life insurance policy is the one that is in force when the insured passed away.  You might think then, wouldn't permanent insurance be the best since there is no expiration date?  And you would be right, except permanent insurance tend to be more expensive.  So cost may be a factor.  I would much rather have my clients buy a 20 year term knowing they will have no trouble paying for it vs. buying a policy and have it lapse in year 5 due to lack of funds.  That being said, there are other options rather than letting it lapse, but that is for another blog post.  

So what circumstances might there be?  In some cases, the need for insurance is temporary—maybe for the next 20 years, until the house is paid for and the kids have left the nest. In other cases, the need may be for a longer term, like an interest in a business. The need may also be for a lifetime, such as providing liquidity as part of an estate plan.  As an example, said you are a real estate investor.  One day, that proverbial bus sideswipe you as you are coming home from a real estate deal.  If you don't have enough liquid assets, such as a huge savings account; your heirs may need to sell off a portion of your real estate empire at a steep discount to pay off Uncle Sam.  Having a life insurance policy can mean having money while your estate is tied up in probate.

Term life insurance is much like renting an apartment or house. It is basic and inexpensive, and that’s all some people may ever need.  Just like renting, there is a lease.  You paid the rent and you get to stay in the house until your lease expires; likewise with term life insurance, you pay the premium and you are insured until your term ends.  When that term ends, you will need to shop for new life insurance if you still want coverage.  The unknown is if you still qualify for life insurance after these years.  While term insurance might be basic, there are also features known as riders that can make a basic term policy unique.  

While I try to keep a light note on my blogs, life insurance is serious and I have seen the difference it can make to a family.  Contact Linwood Forest to learn more and how life insurance can be an asset to you and your family.  Click here to get an online quote.  

-Dave
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