It's important to weigh the benefits of each type of life insurance before signing up for a policy. Term life insurance is only in effect for a limited amount of time, while permanent life insurance is meant to last for your entire life.

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Term Life Insurance Premiums
The rates for term insurance are usually lower than those for permanent insurance, particularly at younger ages. For this reason, term insurance may offer the greatest insurance protection for your premium dollar. The catch is that it only pays benefits if you die during the insured term. The cost of term insurance increases dramatically after age 50. Indeed, each time you renew the policy for a new term, premiums may be higher. For term insurance, consider if the policy is renewable or convertible to permanent life insurance, and how your age and health will affect premium rates at that time.

Permanent Life Insurance Premiums
The rates for permanent insurance are usually higher than term rates during the initial years of the policy. This provides a cash value that the policy owner can borrow against in the future. With a permanent policy, the income earned is tax-deferred and you can borrow against the fund without any tax implications.

Permanent life insurance premium rates typically remain level throughout the duration of the plan because they are averaged over the policy owner’s expected lifetime. Because permanent insurance is meant to insure you for your entire life, once you become insured under a permanent policy, you don’t need to worry about not being insurable at a later time as long as you continue to pay the premiums due. This permanent nature of a permanent policy is probably one of its biggest advantages.

Permanent Life Insurance Types
If you decide that permanent life insurance is best for you, you will need to decide what type of permanent insurance to choose: whole, variable, universal, or universal-variable. Look at the trade-offs between risk and return, the flexibility allowed in the investment portion of the policy, and the flexibility in the premium and death benefit amounts.

To get a sense of what a life insurance policy may include, here is a sample life insurance policy.

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