Term Life Insurance or Whole of Life Insurance Policy?
When looking for life insurance, it’s important to find the best policy for your own unique needs. There are so many web sites offering online discount life insurance, so it’s a common mistake made by many, to end up with a policy that’s not suitable.
One of the questions that arise time and again is whether a term life policy or a whole of life policy is best, and what’s the difference between them.
Term Life Insurance Benefits:
Term life policies cover you a predefined term.
Term life insurance only offers protection for the duration of the mortgage, and is normally of no value when your mortgage is paid off.
However, term insurance is cheap, and the cost can even reduce over time. There are five main forms of term life insurance, and these are as follows:
* The first is level term insurance, and it is the most popular type of cover. This policy has it’s premium costs locked in for the full term of the policy, so you pay the same amount each month for the entire term of the policy.
* The next form of term life insurance is escalating term cover. This policy can be more expensive, as you pay an increasing amount each year. However, the lump sum payable at death also increases. These are normally low cost policies, and are best suited to younger people.
* The third type is known as decreasing term insurance. In this case your monthly payments will stay the same, although the amount of cover you receive will reduce each year.
* The forth type of term life insurance is what’s known as increasing term insurance. Here the lump sum payable at death increases each year. This increase in value of the policy is made up by increasing the premiums periodically over the years.
* Finally, convertible term insurance is a type of term life cover that can be converted into an investment/insurance policy in the future. Normally, the value of such investments will be based on your health, at the time you bought the term insurance policy.
Whole of Life Insurance Policies:
Whole of life cover covers you right up until your death. Provided, of course, that you keep paying your premiums! It can pay out a substantial benefit to your loved ones when you die, and it can also accumulate a cash value over time.
This type of policy is more expensive and complicated than term life policies. The investment you make earns some interest each year. So, providing your investment grows, your annual premiums can actually reduce over time. Also, there may come a time when the interest produced can cover all your future premiums, and as a result you may have no more premiums to pay on your policy.
However, understand that it is possible that the final value of a whole of life insurance policy may not be the same as the amount of money invested in it over the years.
Summary:
Buying a term life policy, or whole of life insurance is an important decision and one that needs to be made carefully. Before you take the plunge, you need to examine your needs, and exactly what you wish to achieve.
Term life policies are the simplest and cheapest to set up, and cover you only for as long as you need them.
On the other hand, a whole of life policy might suit you better if you need a policy that grows in value over the years.
Both types of policy have advantages and disadvantages, and that’s why it’s always a good idea to get advice from a competent insurance adviser.
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categories: life insurance,insurance,protection,mortgage,investments,finance
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