| Term Life Insurance vs Whole of Life Insurance |
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| Written by Michael Pettigrew |
| Monday, 04 January 2010 10:14 |
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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.
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 & it's Benefits: Term life insurance is a bit like leasing a car. You pay cover for a predefined term, and are covered for that term. However, at the end of the term, whether for example its 15 years or 30 years the deal is done and you simply walk away. Term life insurance only offers protection for the duration of the mortgage, and can be of little value when once your mortgage is paid up. Term insurance is also cheap, and can even become cheaper over time. There are also a number of different types of term life insurance to choose from 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 second type is known as escalating term cover. This type of policy can be become expensive in later years, as you generally pay an increasing amount as the policy ages. However, there is an advantage, in that the payout at death also increases. This type of life policy is normally more suited to younger people. * The third type of term cover is known as decreasing term insurance. With this type of policy the monthly/annual payments stay exactly the same. However, the amount of protection reduces each year. * The forth type of term life policy is known as increasing term insurance. With this type of term life insurance the benefit on death increases. However, in order to make up for this increase you will need to increase your premiums at certain times, for example on the birth of a child, or as your financial circumstances improve. * The fifth and final type is known as convertible term insurance. It is a type of term life insurance that you can convert at a later stage into an investment vehicle. The value of the investment is normally based on your health when you originally took out the policy. Whole of Life Insurance Policies: A whole of life policy can be more complicated and more expensive than term life insurance. However, a whole of life insurance policy covers you up until the time of your death, providing that you keep paying your premiums!. The advantage of these types of policy is that your family could receive a considerable lump sum when you die. 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, it's important to understand that the final cash-in-value of a whole of life policy may or may not equal the amount of money that has been paid into the policy over it's full term. Summary: The decision of whether to buy a term life policy, or whole of life cover comes down to your own unique needs, and circumstances, and what you wish to achieve. The simplest form is a level term policy with a renewable option. This will allow you to get life insurance for as long as you may need it. 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 have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Michael Pettigrew writes articles for insurance website Best Insurance Quotes, who provide quality cheap life insurance cover. Visit Best Insurance Quotes for great life insurance cover |