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Financial Services – Types of Life Insurance

Types of Life Insurance

If you’re like most people, you probably feel that you have a responsibility to protect those who depend on you.

Considering life insurance to protect those who depend on you is a responsible and caring act that you should feel good about.

Fundamentally, there are two types of life insurance, permanent and term. Many people have questions about the differences between them.

One easy way to understand these differences is by comparing them to something that is familiar to all of us: owning a home versus renting an apartment.

Permanent life insurance can be compared to owning a home, while term insurance is like renting one. There are advantages and disadvantages to both…

Length of Coverage: 
Permanent life insurance, like owning property, can last you a lifetime. In contrast, term insurance, like renting property, is generally considered appropriate to meet short-term or temporary needs.

Premiums:
Permanent insurance, like owning property, may be less expensive over time because the premiums (like a fixed mortgage) are usually level and do not increase. Term insurance premiums, like renting property, are often initially more affordable – however, over time premiums may increase making protection more costly at a time in most people’s lives when they are looking to reduce expenses.

Equity:
Some types of permanent life insurance, like owning property, can build equity – called cash value. Much like the equity in your home, the cash value in your life insurance may be accessed during your lifetime.* This cash value can accumulate on a tax deferred basis. In contrast, term policies, like renting property, do not build equity – there is no cash value.

If you would like to discuss your individual situation and obtain a no obligation quote for life insurance, please call Dowd Financial Services at 413-437-1038

* Tax-free distribution assumes that the life insurance policy is properly structured and not classified as a Modified Endowment Contract (MEC). Withdrawals are made up tothe cost basis and policy loans thereafter. If the policy is a MEC, cash value is taxable upon withdrawal and if withdrawn before age 59½, a 10% federal income tax penalty may apply. If a policy should lapse or be surrendered prior to the death of the insured, there may be significant tax consequences. Loans and withdrawals will decrease thecash value and death benefit. Cash value accumulation may not be guaranteed. Investments in variable life insurance are subject to market risk including loss of principal.