Term insurance is like an apartment – it’s like paying rent. It’s inexpensive at first but there’s no return.
Permanent insurance is like buying a home. It’s more expensive at first but has the security that equity in a home provides.
Stop paying the premium (rent) with term insurance and you’re without coverage. With permanent coverage you own the coverage and if equity is built up in the policy you may stop paying and still be covered by using the equity (cash value) in the policy.
Term insurance has no equity component – you’re paying for pure protection and that’s all. With permanent insurance, with each payment you’re building equity. You can borrow against it, use it as collateral or supplement retirement income with it.
With term insurance you can expect the cost to keep escalating. Just as rent increases, term insurance gets more expensive with each renewal. With permanent insurance, even though the initial cost is higher, the return is greater and the cost remains constant for life.
Term insurance is temporary and is good for temporary needs. Permanent insurance is just that…permanent.
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