How should I best protect my family’s needs? Should I purchase permanent (Whole or Universal) or temporary (Term) or incorporate a combination of both.

Texas Term Life Insurance is the least expensive way to get the highest face amount on a policy at the lowest price available. In fact, permanent insurance is often three to six times more expensive than term insurance. The trade off is that with term insurance, once the term expires so does the policy. So for example, if you are 50 years old and take out a 10-year term and pass away at 61, your family would receive no death benefit from the policy. In addition, there is a risk involved in replacing a term insurance policy with a new life policy when the original term policy expires. You may want to take out another policy, but you find out that you do not meet the new policy’s underwriting standards because of health conditions; therefore, you cannot secure coverage or you may be subject to a significant rate-up.

Texas Permanent Life Insurance obviously will be more expensive since once you take out the policy you are covered (as long as you make your payments), until the death benefit is claimed. Permanent life insurance is also different than term because the policy not only offers a death benefit but also generates a “cash value” or a savings account feature. This is one of the reasons the permanent insurance policy costs more. The permanent insurance premium is split – a portion of the premium provides for a permanent insurance death benefit, and the balance goes into a savings account that accumulates over time, pays interest, and in some cases can even pay dividends. The savings component has two primary purposes. The policy holder can borrow using the accumulated funds as collateral. If needed, the accumulated cash value can also be used to pay premium.

So how does the consumer decide which type of policy is right for a particular situation? Generally speaking, if you want Texas life insurance coverage for less than 10 years, term insurance is usually the answer. This rule of thumb is especially valid since it typically takes between 5 and 10 years for a permanent policy to generate significant cash value. In that time the policy holder will pay a much higher premium for permanent as compared to the term policy and will not accumulate a significant cash balance.

If you are planning to keep the policy 25 to 30 years, permanent is usually the best answer if you can afford it. The hard part is when your insurance requirements are for a period of time less than 30 years but greater than 10. The simple answer is to talk to an Texas life insurance agent. The agent will assess your needs and develop a plan to meet your coverage goals. Often it is a split plan allocating some of your budget to term and some to permanent life insurance. This approach allows you to take out a higher face amount value at a very affordable premium to cover temporary needs like college expenses and mortgages. The permanent policy will allow you to support estate planning through the accumulation of a tax favored cash asset.

Tim Jarvis is a licensed and experienced Texas life insurance agent who focuses on educating his fellow Texans on the best way to shop and quote Texas life insurance coverage