If you like the idea of having a life insurance policy that grows in value, but can’t fit the premiums into your current budget, a strategy that combines term and permanent insurance might be a good compromise.
Just as time horizons for investments vary, the same is true for life insurance. Most people buy life insurance with the intention of covering a variety of financial responsibilities, not just one. Some of these responsibilities last a lifetime or are only relevant after you’re gone, like funeral expenses or estate taxes. Others are shorter term, such as an auto loan or your child’s college education.
Buying both term and permanent life insurance may be an effective way to meet all your life insurance needs, and in some instances, reduce overall premium costs. To determine if a “combo strategy” is right for you, ask yourself, “How much of my life insurance need will go away in 10, 15, 20 and 30 years? How much will never go away?” To help you answer this question, fill in the chart below.
| Financial Need and Sample Time Horizon |
|
Permanent | ||||||||||||
| Auto/Personal Loan | 2 to 10 years | $ | $ | $ | $ | $ | ||||||||
| Business Need | Varies | $ | $ | $ | $ | $ | ||||||||
| Debt | Varies | $ | $ | $ | $ | $ | ||||||||
| Education | 1 to 18 years | $ | $ | $ | $ | $ | ||||||||
| Estate Taxes | Permanent | $ | $ | $ | $ | $ | ||||||||
| Final Expenses | Permanent | $ | $ | $ | $ | $ | ||||||||
| Home Equity Loan | 5 to 25 years | $ | $ | $ | $ | $ | ||||||||
| Income Replacement | Varies | $ | $ | $ | $ | $ | ||||||||
| Mortgage | 15 to 40 years | $ | $ | $ | $ | $ | ||||||||
| Other | Varies | $ | $ | $ | $ | $ | ||||||||
| TOTAL | $ | $ | ||||||||||||
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