Asset & Income Protection
Mutual Policyowners
How Insurance Works - Managing Risk
The Role of Life Insurance
Life Insurance Fundamentals
Buy Term and Invest the Difference
Policy Features
Cash Value: Questions & Answers
What to Expect When Buying Life Insurance
The Role of Disability Insurance
Financing Long-Term Care
If you've researched or shopped for life insurance, you've undoubtedly heard, "Buy term and invest the difference." This phrase is a common justification for not purchasing permanent life insurance. Some individuals believe that purchasing term insurance, thereby separating the saving element from the insurance element, you can achieve superior financial results to purchasing a permanent policy.
Over a short period of time this strategy may produce favorable results because term insurance is designed to meet a short-term need. However, over the long term, a permanent need is best met with permanent insurance.
Important Questions to Ask
Consider the following as you evaluate which life insurance product to purchase.
Will you be alive after your term insurance expires?
Many term policies are not renewable beyond an age specified in the contract. If you were to outlive your term policy, you would die unprotected.
Will you be able to afford term insurance, as you grow older?
Premiums for most term policies escalate over the life of the policy. Many people lapse annually renewable term policies years before the termination age.
Will You Invest the Difference?
In order to separate your savings and insurance goals, you will have to take steps to invest any money saved in premium payments. Not only do you need a sound investment strategy, the return on your investment needs to out-perform the accumulation of the cash value of the permanent policy you would have purchased.
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Copyright 2008, The Northwestern Mutual Life Insurance Company/Northwestern Mutual, Milwaukee, WI. All rights reserved. 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-4797 - (414) 271-1444. The Northwestern Mutual Financial Network is a marketing name for the sales and distribution arm of The Northwestern Mutual Life Insurance Company, its affiliates and subsidiaries.