Concept of term vs. permanent life insurance
While anyone can purchase term insurance, it is a particularly good choice if you are young and in good general health because you can benefit from affordable rates and guarantee your future insurability.
As well, if your insurance needs are temporary, for example to cover the time you have a mortgage, our term insurance can provide you with the coverage you need when you need it.
Using term insurance:
Limited cash flow
Whole life insurance generally offers a fixed death benefit and guaranteed minimum cash surrender values (CSV) in exchange for fixed premiums. While adjustable whole life insurance has a death benefit and premiums that may increase or decrease periodically,
most flexible type of life insurance: universal life (UL) insurance
With term insurance and guaranteed whole life insurance, the three pricing factors (mortality costs, investment returns and expenses) are said to be bundled together, and they are fixed for the life of the contract. With UL policies, the three pricing factors are unbundled and they are not necessarily fixed.
How permanent insurance differs from term insurance
One of the drawbacks of term insurance is that coverage ends at the end of the term, unless the policy can be renewed. Most insurance companies will not provide term insurance coverage past a specific age, often around age 75 or 80. This means that they will stop issuing new policies at about age 65 or age 70, depending on the policy’s term. So, term insurance cannot provide adequate protection against the risk of death for people who might live beyond this age. Permanent life insurance can provide the extended protection needed for risks that do not have an expiry date.