Every life insurance policy aims to protect your dependents or beneficiaries after your passing.

According to experts at Gibraltar BSN, there are two main forms of life insurance. These include permanent and term life insurance.

What Permanent Life Insurance Is

This is an umbrella term for online life insurance Malaysia that doesn’t expire. Many life insurance policies combine death benefits with a portion of savings.

Its premium goes towards maintaining the policy’s death benefit and allowing the insurance to build up monetary value. A policy owner may borrow funds against monetary value.

And in some situations, they may withdraw money from it outright so as to meet needs, like covering medical costs and paying your kids’ tuition fees.

Permanent life insurance also enjoys favorable tax benefits. The growth of cash value is on a tax-deferred basis. This means policyholders won’t pay any tax on earnings provided the insurance remains active. And provided a certain premium limit is adhered to, cash may as well be taken out of policy without tax. That is because policy loans are not regarded as taxable income.

Types

There are few forms of permanent life insurance. The key differences in these policies have a lot to do with how cash value grows and how premiums get paid over time. Without further ado, the following forms of permanent life insurance:

  • Ordinary or whole life – This is one of the most common forms of permanent insurance. It provides savings accounts and death benefits. If you choose this policy, you agree to pay a particular premium amount regularly. The savings element grow depending on the number of dividends the insurance carrier pays you.
  • Universal – It provides lifelong coverage with several investment account options. All your dependents will surely get death benefits upon your death. And any payment you make on top of the insurance cost will grow on a tax-preferred basis. That means you will not pay taxes on growth, provided it goes beyond a certain amount.
  • Variable – This permanent life insurance combines a savings account and death benefit, allowing you to invest in bonds, money market mutual funds, and stocks. The policy’s value can quickly grow but comes with more risks. For instance, your death benefit and cash value will decrease if the investment doesn’t do well. However, some policies give assurance that your death protection won’t go below the minimum level.

Who Needs It?

A permanent life insurance policy is a perfect option for individuals looking for lifelong protection. It can also be helpful for individuals who want monetary value in life insurance coverage.

Cash value grows over time, and you may withdraw or borrow from it. In addition, the cash value can be available based on the kind of coverage you consider.

Pros

  • Lifelong financial protection
  • No need to renew your policy
  • Pay out dividends
  • Premiums are guaranteed to remain the same
  • Option for choosing to borrow against your policy or cash in
  • There is a cash value

Cons

  • Interest on your cash value is low
  • Inappropriate for the short-term costs, like mortgage debt or funeral expenses
  • The death benefit is separate from the cash value
  • High premium costs

What Term Life Insurance Is

This is a type of online life insurance Malaysia whose policies expire after a certain period. This can be a 1, 5, 10, or 20-year period. Apart from choosing the policy’s length, you may also need to choose the death benefit amount. This refers to the amount of cash your dependents can get after your passing.

Many experts recommend that you reevaluate your insurance policy after a year or even before it expires. This way, you will have plenty of time to assess your options.

A couple of insurance companies may allow you to renew your coverage or even convert term insurance to permanent one. You may also let your cover expire. This may mean that your coverage won’t protect you anymore, and you won’t pay a premium.

But unlike permanent insurance, term life insurance is cheaper. Plus, it allows you to change to what you think is best for you.

Types

There are several types of this insurance, which can meet your needs and that of your beneficiaries. Some of these may include the following:

  • Return of premium – If you outlive an insurance policy, the premium you pay will be refunded. This makes this kind of policy more costly.
  • Lever term – Usually, the premiums for this policy remain unchanged throughout the period.
  • Decreasing term – Although the premiums of this policy remain unchanged over time, the death protection will gradually decrease. Mostly, it is used to cover debts being paid down.
  • Annual renewable term – The premiums for this insurance policy increase yearly after you renew it. The coverage is often guaranteed, and you will not find it necessary to reapply yearly. But it will be thoughtful of you to buy a 15-year or longer policy.

Who Needs It?

A term life insurance policy might be perfect for individuals looking for short-term and affordable coverage. It is convenient for a young family, a business owner, and a homeowner with a mortgage.

You may reassess your option if you are still alive after the period expires. By the time it reaches that point, all your debts will have been paid off. So you may opt to renew or stop the contract completely.

Pros

  • Low premiums for younger folks
  • Dependents can get a larger death payout
  • It may get converted to other forms of insurance policies

Cons

  • A temporary cover
  • You will need to requalify when the first contract comes to an end
  • Policies don’t accumulate cash value
  • Premiums may increase as you grow older
  • Hard to qualify when you have health issues
  • You risk losing tons of money when you die without cashing anything out

Which is better?

If your concern is cost, term insurance can be the way to go. Some even offer one-year renewable terms. But if a solid solution is what you are after, with your dependents in mind, permanent life insurance can be suitable. So the best option for you depends on your needs, affordability, and end goals.