Term or Permanent: Which is best for you?

Generally speaking, there are two categories of Life Insurance, term life insurance and permanent life insurance. Often, the solution is a combination of both, since most people have a need for both temporary (term insurance) and lifetime (permanent insurance) protection.

To help you decide, consider four basic factors:

• Death benefit
• Duration of coverage
• Premiums
• Cash value

Death Benefit

Permanent life insurance provides a death benefit for as long as you live.

Term life insurance provides a death benefit for a stated period of time.

Duration of Coverage

The longer period of time that insurance protection is needed, the more consideration you should give to permanent life insurance. For short-term needs, term life insurance may be appropriate.

Examples of permanent needs are:

• Financial needs of loved ones
• Final expenses
• Contributions to charities
• Estate taxes
• Business needs, such as supporting a buy/sell agreement or providing key person protection

Examples of temporary needs are:

• Educational expenses
• Home mortgage
• Automobile loan

Premium

Permanent life insurance premiums are generally level and payable for life.

Term life insurance premiums will increase over time, are payable for a specific period of time and generally increase at each renewal.

Cash Value

Guaranteed cash values can provide money later to help with temporary needs or emergencies.

Permanent life insurance accumulates guaranteed cash values and may be eligible for dividends:

• The growth in cash values is tax-deferred under current federal income tax law.
• You may borrow against the cash value as a policy loan at the current policy loan interest rate. Borrowed amounts reduce the death benefit and cash surrender value.
• Amounts withdrawn that exceed the cost basis of the policy are federally income taxable.
• Dividends are a return of premium and are based on actual mortality, expense, and investment experience of the company.
• Dividends are not guaranteed, since actual experience is not known in advance.

How to choose

Together, you and your State Farm® agent can assess your Life Insurance needs to help you choose the coverage that is best for you.

Contact your State Farm agent for additional information or if you have any questions. They can also give you details on cost, coverage and restrictions.

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