Life Insurance… Is It Worth It? Part 2
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Life Insurance… Is It Worth It? Part 2

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saginaw bay underwriters life insurance

Many people still ask themselves: Is life insurance really worth it?

Saginaw Bay Underwriters created this helpful, two-part series of posts entitled “Life Insurance… Is It Worth It?” to address this question, and help you answer it for yourself and your family.

See “Life Insurance… Is It Worth It? Part 1”

Here in Part 2, we’ll look at some pros and cons of the two types of life insurance.

Term Life Insurance Pros & Cons

As discussed in Part 1, a term life insurance policy:

  • Provides coverage only for a set amount of time, or term
  • Has guaranteed premiums for that term
  • Pays out if the insured passes away within the term

Here are some term life insurance pros and cons that you may want to consider when deciding whether it would be the right option for you and your family:

Term Life Insurance Pro: Typically lower premiums. Since its limited by the length of the term, term life is typically less expensive than permanent life.

Term Life Insurance Pro: Flexibility. Unlike a permanent life insurance policy, you can decide the length of time you’d like your term policy to be in effect.

Term Life Insurance Pro: Upgradeable. If you decide you’d like your term policy to become permanent, this is an option with term life insurance.

Term Life Insurance Con: No cash value. A term life insurance policy does not have cash value and can’t be invested or borrowed against, unlike some permanent policies. All term policy premiums go towards death benefits, so if there’s no death within the term limit, those premiums are not recoverable.

Permanent (Whole) Life Insurance Pros & Cons

As discussed in Part 1, a permanent life insurance policy:

  • Has no set term limit – it is in effect as long as premiums are being paid
  • Can include a savings mechanism – i.e. can have cash value – allowing for investing and withdrawals

Here are some permanent life insurance pros and cons that you may want to consider when deciding whether it would be the right option for you and your family:

Permanent Life Insurance Pro: Tax advantages. As with a 401(k) or IRA, you don’t pay taxes on the interest, dividends or capital gains on the cash-value component of a permanent life insurance policy.

Permanent Life Insurance Pro: Coverage for life. Unlike a term life insurance policy, you don’t lose coverage after a certain number of years.

Permanent Life Insurance Pro: Withdrawal options. Unlike a 401(k) or IRA, you can borrow penalty-free against the cash value of a permanent life insurance policy to buy a home or pay for college.

Permanent Life Insurance Con: Cost. A permanent life insurance policy typically has higher premiums than a term policy. Moreover, borrowing against your policy’s cash value can lead to a later “hidden cost” in the form of reduced death benefits.

Making the Complex Simple

Many people still ask themselves: Is life insurance really worth it? We hope these posts have helped you answer this question for yourself and your family.

Call Saginaw Bay Underwriters at (989) 752-8600 if you’d like to speak more about life insurance with an advisor.

Saginaw Bay Underwriters has made every attempt to ensure this information has been obtained from reliable sources. Current as of: March 2021

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