Term vs. Permanent – Why I Chose Term Insurance

term insurance and permanent insurance

Which life insurance policy is right for you?

Like I mentioned in my term insurance vs. permanent insurance post, I went through a detailed thought process in making my insurance decision.

If you are a frequent reader of Finance and Flip Flops, you know my life has recently changed.

In an effort to get ready, I decided it was time to buy  life insurance (crossing off steps on my to-do list in my financial planning for a new parent post).

In that post, I talk about the need to get life insurance to protect my family in the event I die.  After reviewing the insurance options, I went with a term policy.

Why, you ask? See below…

1 – Term Insurance is Easy to Understand

Term insurance is easy to understand.  I buy coverage for a set number of years (typically ten years, 20 years, or 30 years).  If I die during that set number of years my beneficiaries receive a death benefit.  If I live past the stated term, my beneficiaries get nothing.

2 – Term Insurance Leverages Your Premium Most Efficiently

With term insurance, I buy the largest death benefit for the lowest annual cost (all else being equal).  Paying less is good.

Paying less means I will have more money available to do things I want.  Or in “N”‘s case, buy more jeans (because in her words she “needs” them).

3 – The Cost is Fixed

I am young”ish” and healthy now.  By purchasing life insurance today, I am locking in my annual premium payment for the length of the policy. The amount I pay today will be the same amount I pay in ten years, 20 years, and 30 years.

4 – My Need for Life Insurance is Temporary

Eventually, “O” will be grown and financially independent (I have written it once, and I will write it again—come on future professional athlete.).  At that point, will I have a need for life insurance anymore?  Most likely not.

By that point, I hope to have saved enough that “N” will be set financially when I pass away.  She would not need my insurance policy anymore.

5 – Permanent Insurance is High-Maintenance

Permanent insurance is a high maintenance friend, girlfriend, and/or partner – complicated and expensive.

There are too many moving parts that affect the outcome of the cash value and death benefit. It may seem like a great option on the surface but when you dig into the details it may not be worth your time.

Of course, everyone’s situation is unique .  What works for me may not work for you.  It’s best to engage a financial expert who looks at your entire financial picture, and who isn’t simply looking to sell you insurance.

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