Life Insurance Choices Term or Whole

Saturday, January 26, 2013

Life Insurance Choices Term or Whole

A life insurance policy is designed to give our loved ones and us shelter and some degree of economic comfort in the event of someone dying. It is actually an extremely vital part of financial planning. The loss of a loved one can be both emotionally and financially devastating. A financial compensation goes a long way to streamline things in your favour. 

 There are two types of life insurance that people often ponder - term life insurance and whole life insurance. They are unsure as to which of these policies to choose. This article gives an overview of both policies and provides suggestions of which approach would best fit particular situations.

 Term Life Insurance

 A term insurance policy offers coverage for a limited number of years and only offers coverage for the insured's life. Upon the death of that individual, the face amount of the policy is paid to the named beneficiary on the policy. A term life policy can be bought to provide coverage for periods generally lasting between one to 30 years. Choice plays a pivotal role in whether or not the actual benefits of this policy are realized.

 Whole Life Insurance

 Whole life insurance policy offers coverage for life and has an investment feature. It is a combination of term policy and an investment component with the second feature possibly being placed in stocks, or bonds and money-market instruments. The insured can borrow against the cash value that builds on the policy. There are three types of whole life insurance policies that would be most commonly known - universal, variable and traditional whole life policies. Whole life policies also provide protection against property taxes.

 Similarities between term life and whole life insurance policies - The death benefits are paid once the insured dies while the policy is in effect. The benefits are free from federal tax.

 Differences between term life and whole life insurance policies - Whole life insurance is more expensive because the insured is paying on not just the cover, but also the risk aspect of the policy. Whole life policies build cash value that could be used for future loan needs.

 Which Policy Is Best for You?

 Your policy preference should be based on your age and financial objectives. A term insurance policy is ideal for fulfilling temporary coverage needs such as those of a couple raising a family, or a family at the point of paying college fees. Term life policies are generally less expensive for those under 50 years of age and in good health. At age 50, the value gradually increases. This allows the insured to purchase larger death benefits during the years of having a mortgage, raising children and paying school fees.

 Whole life insurance policies are suitable for those who want to make some money over a period of time. It is also the perfect policy to operate on if you are interested in guaranteeing a death benefit. You can fix your expected premium by going through some home insurance quotes.

About the author-

Sam Fenton is a professional insurance agent. He writes on a variety of insurance-related topics and loves nothing more than helping homeowners make the best deal possible.

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