Gary Poster, with essential assists from Galyn Norwood, Phiroon Phihakendr, Jose Quijada, Pavandeep Kalra. In a guaranteed level-term policy, the premium stays the same, but to renew at a favorable rate you usually have to take another health exam. Premiums, expenses and commissions are lower for term than for whole life. No cash value builds up, but a convertible term contract allows you to convert to a cash-value policy later. Intense competition has driven down term life premiums as savings banks, affinity groups and big insurance companies compete to offer deals.
Term is unquestionably the best choice for most young families.
But after age 50, premiums can run into thousands of dollars a year, even if you're in good health. By 60, premiums are often prohibitive. Permanent policies provide a death benefit for as long as the premiums are paid, plus a savings or investment component that policyholders can borrow from or draw down as retirement income. Commissions and expenses slow the accumulation of cash value in the early years of the policy, so you should buy permanent life only if you'll keep the policy for at least 20 years. This is the kind of policy your father or grandfather might have had.