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Term vs. permanent ... vs. both?

​When it comes to protecting your family, some decisions are no-brainers. But with life insurance, the choice may not be so obvious.

Debates about term vs. permanent life insurance are common. The fact is both forms offer their own advantages. The “right” choice varies depending on your age, needs, budget and other factors. For many people, the right choice is to have both.
Consider these three scenarios.
Scenario 1: Young family
Clint, Cara, Austin and Andy Kaiser
With two small children, they have a large protection need right now. They want to make sure their kids will be provided for if either of them dies prematurely.
The Kaisers like the added benefits of permanent coverage, but they don’t want to pay premiums forever. And their budget is tight.
Cara and Clint consult their Modern Woodmen representative, who recommends a combination plan. With this type of plan, the Kaisers can each:
  • Purchase a whole life certificate to get the base of permanent coverage they want.
  • Add a lower-cost term life insurance rider to cover their additional needs while the kids are growing.
They decide to each purchase whole life coverage that will be paid up by the time they retire. Then they add 20-year term riders with larger face amounts. At the end of 20 years, their children will be out on their own. The Kaisers’ need for life insurance will lessen, so they could choose not to renew the term insurance. But they have peace of mind knowing the whole life insurance will always be there to cover permanent needs, like final expenses.

Scenario 2: Growing (to grown) child
Brady Adams
At age 5, Brady's grandparents give the gift of whole life insurance that will be paid up by the time he graduates from college.
The life insurance plan protects Brady’s future insurability. That means he’s guaranteed protection throughout his life – even if he develops health problems. Plus, his permanent plan builds cash value. He could borrow from the cash value to help pay for school if needed.
Brady marries in his late 20s and buys his first home. He’ll always have that paid-up, permanent coverage, but he knows his life insurance needs are greater now. His budget, however, isn’t.
With the help of his Modern Woodmen representative, he supplements his coverage by adding a 30-year term life insurance rider to the whole life plan his grandparents purchased for him. This helps ensure Brady’s new wife will be able to stay in their home even if he dies before the mortgage is paid. As Brady’s financial situation improves in the future, he can choose to convert a portion – or all – of his term life insurance to permanent coverage.

Scenario 3: Small-business owner
Lisa Bowers
Lisa inherited the family restaurant several years ago. Seeing the value of life insurance firsthand, she talked to her Modern Woodmen representative about purchasing her own plan. Term life insurance made the most sense for her at the time. Funds were low, but her needs were high thanks to her new business venture.
Now with a few years of profits under her belt, Lisa is ready to discuss permanent life insurance. The sooner she starts a permanent plan, the more affordable it will be. She converts a portion of her term life insurance to a universal life insurance plan. She can adjust her premium and insurance amount (within certain limits) as her needs change.
By owning both types of insurance, she ensures she always has the amount of coverage she needs while staying within her budget. And she is gradually building cash value in her permanent plan. She thinks of that money as her safety net should she run into an unexpected business expense down the line.