Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

With so many types of life insurance to choose from, how can you know which one is right?

This week, I’ll try to make that choice a little simpler.

The age-old battle: term or permanent?

I could devote thousands of words to this debate. (I won’t...you’d fall asleep — lol.)

Several famous financial advisers overly-simplify this decision.

For them, it’s always term insurance. I agree that term insurance can often be the best option and it’s certainly cheaper at the beginning.

But before deciding to buy that cheap term policy, there are several reasons to consider a permanent life insurance solution.

Let’s look at four pro-term insurance arguments, and then “the rest of the story”:

Number 1: “Buy term and invest the difference” is usually the biggest reason used to persuade people to choose term insurance. That sounds fine... if you invest the difference. But most people don’t invest the difference. Permanent insurance can be a form of disciplined savings for emergencies.

Number 2: “The rate of return on the investment is lower in permanent life insurance.”

Often true, but not always. There are many new types of permanent insurance plans that have market-competitive savings plans built into them.

Over time, especially 20 years or more, they can be extremely competitive. The unique tax-deferred growth within a permanent life insurance policy is one reason for this.

It can also offer less risk on the investment.

Number 3: “You only need life insurance during the years you have dependent children.”

If this argument were always true, then the case for “term insurance only” would be stronger. But it’s often not true.

There are many people who might wish (or need) to have life insurance that lasts their entire lives. A permanent life insurance policy will pay a death benefit even at 99 years old.

If you have a special-needs child who will need help for the rest of their life, a permanent policy might be a better choice.

This also can apply if a child of any age becomes injured in an accident and suddenly needs special lifetime care.

Number 4: “You can always get another term insurance policy after the first term runs out.”

This argument is made based on the fact that most term policies are “convertible” or “renewable” after the term. That’s true.

But if you are not healthy, the cost to continue your 20- or 30-year term policy is astronomical—almost prohibitive in many cases. And we all know that health can change in an instant.

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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or bruces@sackifs.com.