Permanent life insurance is more expensive

As you might expect, permanent life insurance premiums are more expensive than term premiums, because some of the money is put into a savings program. The longer the policy has been in force, the higher the present value, because more money has been paid and the cash value has earned interest, dividends or both.

The debate is all about cash value. If you have a policy today, your first annual premium is probably much higher for a permanent life for the policy as a concept.

However, the premiums for permanent life remain as over the years, while the premium for the term of life. The extra premium in the early years of continuous policy is invested and grows, minus the sum of the agent takes as a sales commission. The gain is tax-free, if the policy is cashed in deferred and during your life. (If you die, the proceeds are usually tax-free to your beneficiary.)

The saying you always hear is: "Buy one and invest the difference." The fact is, it depends on how long your policy. If the permanent political life long enough, this is the best offer. But "long enough" varies depending on your age, health, insurance company, the types of policies chosen, interest and dividend rates, and more. The reality is that there is no simple answer because life insurance is not a simple product.


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