Term or permanent life insurance? Part III of IV
By Ginger Applegarth
Guidelines to live by when buying
Even with all of these variables, there are some guidelines you can follow. The key is how long you plan to keep the policy. If the answer is less than 10 years, term is clearly the solution.
If it is more than 20 years, permanent life is probably the way to go. The big gray area is in between. Here is where you need an expert to run the term vs. permanent analysis for you. (See “When it pays to consult an insurance pro.”) Of course, this assumes you keep the policy in force. Most people drop their policies within the first 10 years, but if you do your homework now, that shouldn’t be the case for you.
How to choose
Start by assessing your life insurance needs with MSN Money’s Life Insurance Needs Estimator.
Categorize your insurance needs by their use. If you need $60,000 for college and your youngest child will graduate in three years, you need $60,000 of term insurance as a short-term hedge against your death, thus insuring that your child can finish his or her education. Meanwhile, if your estate will owe $200,000 in taxes at your death, you probably need permanent insurance, because you’re not likely to die in the next 20 years (you hope). You also may want to re-evaluate your estate plan, but that’s a different issue.
Once you figure out your needs, it’s time to choose the type of policy that makes most sense for you.
Thanks for stopping in and I hope you found this insightful.
Fri, Oct 9, 2009
Debt Free Living--Retire Rich, Financial Planning, Life Insurance