Skip to main content

· insurance, investment, savings, taxes

Living Your Best Life…Insurance—Term vs. Perm

There are tools or machines many people use every day, such as a toothbrush, cellphone or car. Other equipment may be used less frequently, perhaps weekly, such as a dishwasher or washing machine for clothes. There are also financial tools and services that are used at different rates. An automated teller machine (ATM) may be used once a week to grab some cash, while a checking account could automatically transfer money to a savings or investment account monthly.

All of these services are important; they are needed to accomplish essential activities and goals in our lives, and people expect them to be available when they want or need them. However, there are other financial services—that for very good reasons—are not used frequently, but can be enormously helpful if they are available. There's even a valuable financial service that is used only once, and it's extremely beneficial in how it can help you and your family—that service is life insurance.

What is life insurance and how could it help me?

Basically, life insurance is a legal and financial contract—a policy—between an insurance policyholder (an individual or organization) and an insurer, which is usually an insurance company. In the contract, the policyholder pays money—known as the premium—either over time in installments or in a single payment to the insurer. In exchange for the premium, the insurer promises at a later time to pay a specific person (a designated beneficiary) a lump sum of money known as the death benefit upon the death of an insured person, which is often, but not always, the policyholder.

Life insurance provides support to your partner, family or friend if you pass away. A life insurance benefit can assist in paying a mortgage, or for living expenses, medical care costs, college, a car, retirement and many other necessities of life.

Are there different types of life insurance?

There are several types of life insurance, and its most common forms are term, whole life (also known as “perm”), universal life, variable, and variable/universal life insurance. There are different features to each type, and this topic can get a little complicated as these forms are compared in detail. This post is going to just cover some of the basics of term vs. perm life insurance, and in future blog posts, other types of life insurance will be explained in more detail.

One factor that can strongly affect both the ability to get life insurance and its cost is your physical condition, which includes your medical history and current health status. Not always, but often, a medical examination is required as part of the process to review and approve someone for a life insurance policy; this process is known as underwriting. If a medical exam highlights a serious pre-existing medical condition, then that may affect the type and cost of insurance coverage available to you; having a pre-existing condition may result in higher premiums.

What are the differences between term vs. perm insurance?

  • Term life insurance is generally bought to provide coverage for a specific period of time—usually for years, and sometimes for decades—and, possibly, for a specific need. Term life insurance could be purchased to help pay for college, so the term when the policy is active (or “in force”) might be 18 or 20 years. Another use for term insurance could be to help pay off a delayed debt, such as a loan, or a mortgage in 15, 30, or more years. Term life insurance policies may also be called protection policies, and in many situations may be the most affordable life insurance choice. There are also convertible term policies, which can be converted to permanent insurance (usually without a medical examination) in exchange for paying higher premiums.
  • Permanent (“perm”) life insurance lasts as long you do, and pays a death benefit whenever you die. Sometimes called investment insurance policies, permanent life insurance policies allow the insured to pay their premiums and then grow those premiums in tax-deferred accounts. As the accumulated premiums grow, you can borrow from these funds for almost whatever you need. Perm life policies tend to be more expensive than term, but they have the significant benefit of growing your capital—your invested premiums. The invested capital is also called the cash value of the policy.

What type of life insurance is right for me?

The type of life insurance that will fit you the best depends on your current budget, needs and future life goals. You should begin by considering several key questions, including:

  • What do you want accomplish with the policy? Do you want to accomplish a specific goal while you're alive or provide for your family when you're not?
  • For how long do you need the policy—for a set number of years or your entire life?
  • How much coverage do you want and can afford to pay—$250,000, $500,000, or $3 million in coverage?
  • Do you need the flexibility of changing your type of insurance and coverage amount as you get older?
  • Do you want life insurance to be an investment, and do you want to borrow from it? 

What if I have questions on life insurance?

There are lots of options for life insurance, and it's vital that you find coverage and a policy that precisely fits your needs now and for the future. If you'd like to know more about life insurance, then Members Insurance Advisors1, Delta Community's wholly owned subsidiary, is available to guide members to the appropriate life insurance policy with the assistance of Covr Financial Technologies, Inc.2 and TruStage®3.

1Members Insurance Advisors is a wholly owned subsidiary of Delta Community Credit Union. Insurance products are not deposits of Delta Community Credit Union and are not protected by the NCUA. They are not an obligation of or guaranteed by Delta Community Credit Union and may be subject to risk. Any insurance required as a condition of an extension of credit by Delta Community Credit Union need not be purchased from Members Insurance Advisors and may be purchased from an agent or an insurance company of the Member's choice. Business conducted with Members Insurance Advisors is separate and distinct from any business conducted with Delta Community Credit Union. The insurance offered is not a deposit and is not federally insured or guaranteed by Delta Community Credit Union.

2Life Insurance products sold through Covr Financial Technologies Inc ("Covr"). Covr sells insurance as an agent or broker by contractual agreements with its insurance carrier providers. COVR is licensed in the following states: Delaware (3000067942), Idaho (607086), California (0L77229). All other state license numbers are available on our State License Disclosure Page.

3TruStage™ Life Insurance is offered by TruStage Insurance Agency, LLC and issued by CMFG Life Insurance Company. The insurance offered is not a deposit and is not federally insured or guaranteed by Delta Community Credit Union. LIFE-1112-C9B