Term Life Insurance Is Often Best But Most People Buy Permanent

— June 27, 2023—
Published in Money / Personal Finance
on msn.com
by Greg Iacurci

Term life insurance is often best, financial advisors say — but most people buy another kind

• Consumers can buy two types of life insurance: term or permanent. The latter category includes whole life and universal life.
• Term life insurance is generally the best option for most people since it’s the most cost-effective, say financial advisors.
• Yet, 60% of policies sold in 2021 were permanent policies, while 40% were term, according to the American Council of Life Insurers.

Term insurance will probably be the most cost-effective way to address survivor income needs, especially for minor children. Prospective buyers should consider the “three Ls” when deciding how much life insurance to get: liability, loved ones and legacy. For example, if you die, how much money would you want to leave for liabilities such as a mortgage, student loans or auto loans? How much money would loved ones such as a spouse and kids need if they were to suddenly lose a policyholder’s income? How much would you want to leave as a legacy for causes that are important to you? Thinking about these questions will help guide the term of a policy.

Marguerita Cheng, CFP [CNBC Advisor Council Member]

Those buying a term policy should be sure to buy “convertible” term insurance, advisors said. This gives policyholders the option to convert their term policy into a permanent policy once the term has ended, but without having to undergo another round of medical underwriting. At that point, the person may be denied coverage if in poor health.

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