Ah, the age old argument. Term versus permanent (whole life or universal life)! Not that I think for even a minute that this list will win over anyone who sells whole life, but I just felt compelled to throw out a list of perfect uses for term insurance.

1. A 30 year term when you are in your 20’s or 30’s and haven’t got a clue what your permanent life insurance needs are, or for that matter what permanent insurance needs are, period.

2. Term insurance as mortgage protection. Unless you are the first person with a permanent mortgage, the idea permanent mortgage protection is pretty bizarre.

3. Term insurance for business purposes. I often advocate 10 year term for a lot of business purposes simply because most businesses change too rapidly for a longer term to remain meaningful and accurate. Permanent insurance, for the same reason, would be silly.

4. Term insurance for income replacement. While we are, as a country, working more and more years, income producing years have not become a permanent issue. This is a risk that can be managed with term insurance quite effectively.

5. Children. With the rare instance of a permanently disabled child, children are simply not permanent insurance problems unless you are doing something really wrong. I believe in carrying term insurance that will provide for them up until the time they have a bachelor’s degree. They should have a handle on independence by then.

6. Personal loan guarantees. I’m not talking about the $100 you borrowed from your brother, but large personal loans are really not that unusual and are generally informal and very often don’t have collateral attached. Do the right thing and get term insurance with the lender as beneficiary, even if they don’t ask for it.

7. For parents that are somewhat dependent on you. You will likely out live them, so permanent insurance isn’t necessary. Term insurance makes sure that they are taken care of if something unforeseen happens to you.

8. To subsidize a retirement package. Especially if you are healthy, it often makes great sense to take a larger monthly retirement option with no spousal benefit and then carry a term insurance policy to the point where assets and other retirement accounts are adequate to cover the much smaller number of years left.

9. Because Dave Ramsey says so.

10. Because term insurance is affordable. It may mean that you can have something rather than nothing and that is a good thing. It may mean you can carry enough as opposed to only what you can afford with whole life and that is a good thing.

Bottom line. Term insurance is the right product for 95% or more of life insurance needs. Think it through. Is that need really permanent?

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