One way of looking at the choice between term and permanent life
insurance is as a lease and a purchase. When you take out a term
policy, you lease the right to death benefits during the term. When the
contract ends, you have no further interest. But when you buy a
permanent policy, it stays in force during your lifetime and
accumulates a cash value from a tax-deferred savings component. So a
permanent policy is term insurance plus an investment account and many
buy this kind of policy because you can borrow from the cash component
or surrender a part of the policy during your lifetime.

Because of the savings or investment component, permanent policies
cost more than term policies. The first main issue for you to consider
is the scale of the investment element. Over the last ten years, the
stock market has outperformed other forms of investment. It’s only
recently that the DJIA and other indicators have begun to fall. Thus,
if all you want is high growth, don’t buy policies of this type. Buy
term insurance and make your own investment decisions.

Insurance companies are not wealth managers with a mission to
maximize your capital. They are conservative investment managers whose
only mission is to provide steady growth (if possible) over time.
Remember, to maintain the tax efficiencies, the policy should be in
force at least fifteen years. Always think long term and, so long as
the policy has the required number of years in play, the benefits pass
to your beneficiaries tax free.

The different types of permanent insurance policies give you a
choice on how your savings are to be invested. It’s up to you to
investigate the options and to be comfortable with the decisions you
make about risk. A further essential element to consider are the
options to stop paying the premiums later in the policy’s life.
Depending on the terms of the policy, you may be able to use the
accumulated investment income to pay the premiums, or you may buy an
annuity with that element. This will relieve any financial strain in
maintaining instalment payments during your retirement.

Finally, look carefully at the conditions you have to meet to
withdraw cash from the investment account, or borrow from the account
or use it as collateral for a loan. Since there will be both a cash and
surrender value, it is important to know how to use this value to pay
for your children’s education or should an emergency arise. Always have
a clear understanding of a policy before you buy. Never buy simply
because the premium is a low or affordable cost. Get the best value for
your money.