An In-depth Look at the Pros and Cons of Different Types of Life Insurance

Is Life Insurance Worth It?

Life insurance in NYC can be used to pay off final expenses, eliminate outstanding debts, or even cover daily expenses, depending on the kind of policy you select.

The question of whether purchasing life insurance is a smart decision and investment or not depends on what kind of coverage you need and what you want from a policy. Rather than rushing to purchase any policy, it is better to seek out the best option for your circumstances.

Types of Life Insurance

Although life insurance plans vary, they generally fall under two categories, which are permanent and term.

Permanent Life Insurance:

Not only does this cover you for life as long as you pay up your premiums, but some types of permanent life insurance also have an investment component that allows policyholders to accumulate a cash value. This is why most agents advocate getting life insurance as an investment.

Term Life Insurance:

This kind of insurance, on the other hand, covers you for a certain period of time. For example, you can decide to purchase a twenty- or thirty-year term life insurance policy. It serves a similar function as other insurance policies, like car insurance, that you might carry in which you pay a premium each month and get paid benefits if something bad or unexpected happens. This is a less expensive policy than permanent life insurance as premiums are lower.

Pros and Cons of Permanent Life Insurance

There is nothing that has advantages but no disadvantages, although many arguments have risen in favor of using permanent life insurance as an investment. Still, the benefits that come with it can also be gotten in other ways without paying the costly management expenses and agent commissions that go hand in hand with permanent life insurance.

Pros

  • Getting a permanent life insurance policy with investment components helps you grow wealth based on tax deference because you don’t have to pay taxes on any interest, dividends, or capital gains on the cash-value component of your policy until you withdraw the proceeds.
  • A permanent life insurance policy can cover you for life, and it is quite beneficial, especially if there’s an anticipation of a family member, such as a disabled child, being dependent on you beyond the length of a typical policy.
  • In the event that you develop a medical condition, you can receive 25 to 100% of your policy death benefit before you die.

Cons

  • It is very costly.
  • There could be tax implications for your beneficiary if you surrender the policy or pass away with an outstanding loan.
  • Reduction of the death benefit paid after your death for taking loans or accelerated benefits beforehand.

Pros and Cons of Term Life Insurance

Pros

  • It is less expensive and assumes less risk since it is only for a set term.
  • It is highly flexible as you can choose how long you want it for.
  • You can easily convert to permanent life insurance coverage if you wish to extend your term life policy indefinitely.

Cons

  • There is no cash value or investment component.
  • Lapse of the policy if the term ends while you’re still alive.

Is Life Insurance a Smart Investment?

Permanent life insurance as an investment is best for high net-worth individuals, while term life insurance is a better option for individuals with an average income. If you’re looking for the right life insurance coverage, contact our experts at Premier Risk, LLC to get started! We serve Long Island and neighboring cities in New York.

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