Life insurance is essential when you have dependants. Without proper coverage, family members who rely on your steady income may be left footing bills they can’t afford if you die an untimely death.
So when determining the type of life insurance you need, it’s first important to distinguish between term and permanent life insurance. Term, the most popular option, means you pay a fixed premium that will provide coverage for a finite period of time, often for a decade or two. Permanent offers continuous coverage for life and often comes with an investment component.
For most people, term insurance is the way to go, says David Aston, personal finance expert and author of “The Sleep-Easy Retirement Guide.”
“It essentially covers your dependants in the event you die prematurely,” says Aston. “And there’s rarely a need to have life insurance after you retire.”
Term vs. permanent life insurance premiums
$600 to $800
Approximate cost range for a term life insurance premium, for a male 35-year-old, non-smoker.
$3,400 to $9,800
Approximate cost range for a permanent life insurance, for a male 35-year-old, non-smoker.
Term insurance is cheap and finite, while permanent insurance is far more expensive. Some estimates peg it at five times the rate of a 20-year term policy.
According to winquote.net, the average premium on a term life insurance policy for a 35-year-old non-smoker will range between $600 and $800 annually. In comparison, a permanent policy — with all the bells and whistles attached to it — can range between $3,400 and $9,800 annually.
Only in rare circumstances does a permanent policy make sense, says Aston. For most people, term is much better.