Affordable Life Insurance Plans: Term and Permanent Life

Paper family of four under a Life Insurance paper cutout umbrellaWhen saving or investing for the future, guaranteeing the future of your family and loved ones is a smart move. Like paying for life insurance, we ensure emergency protection for our family and help them with debts and unexpected expenses. At the same time, we also look for affordability. But are there truly affordable life insurance plans?

Today, there are many types of life insurance plans. The most basic are term and permanent. Both policies’ affordability can be viewed through their prices and expected returns.

Affordability and price

Term life is far more affordable than permanent life. The former costs $20 to $30 a month, while the latter costs about four times more. This is because term life only offers a death benefit protection. Term life insurance’s coverage is bought for a certain period of time, e.g. 10 to 30 years.

Permanent life insurance is unique from term insurance, as it offers a death benefit protection and a cash value component. Compared to term, it doesn’t have a time limit. The plan will last for the rest of the insured’s lifetime as long as the premium is paid. There are several types of this life insurance plan — e.g. whole life, universal life, or variable life — all offering death benefit and a cash value, and some with dividends if the insurance company is profitable.

Affordability and ROI

While term life is easily the cheaper type, permanent life can be considered ‘affordable’ too if you look at the return on investment. In permanent life, ‘affordability’ is achieved by a guaranteed death benefit, level premium, and cash value. The policy’s cash value can also be linked to investments.

If you examine the costs of both plans, the term is cheap because the returns are lower. For permanent, one is purchasing a potentially bigger return at higher costs.

When looking for life insurance, you only need to settle with the need for a cheaper plan or one that increases financial leverage through higher returns.