Term Life Insurance vs Whole of Life Insurance
When buying life insurance its vital you get the right policy for your needs. With a plethora of web sites offering discount life insurance, it's often easy to end up with a policy that is not suited to your unique needs and circumstances.
When buying life insurance its vital you get the right policy for your needs. With a plethora of web sites offering discount life insurance, it's often easy to end up with a policy that is not suited to your unique needs and circumstances.
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.
This means that term life insurance only offers protection for the duration of the mortgage, and is usually of little value once your mortgage is fully 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 known as level term cover, and it's the most common type. With this form of policy the premium costs are locked in for as long as you hold the policy. In other words, you will pay the same amount throughout the entire term of the policy.Unfortunately, it means that as time goes by you could end up paying more for your life cover. However, the nice thing is that you get the benefit of paying at today's rates. However, bear in mind that over time these rates could fall instead of rise.
* The second type of term life cover is known as escalating term insurance. This type of scheme means that you pay an increasing amount each year, so the payout at death also increases. They are generally low cost policies, and are more suited to first time buyers and the young. However, they can become more expensive as you get older.
* 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 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 & it's Advantages:
Whole of life insurance covers you right up until the time of your death, providing that you keep paying your premiums. It can give a considerable lump sum to your family when you die, and it normally accumulates in value over the years.
Whole of life policies can be more expensive and more complicated than term life insurance. Also, the investment you make can earn some interest each year. Therefore, since your investment generally grows each year, your premiums can actually reduce over time. You may also reach a time where the interest gained covers all the future premiums, which means you may have no more premiums to pay.
However, it's important to understand that it is possible the cash-in-value of a whole of life policy may actually be less than the amount put 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, you might like to consider a policy that grows in value over time, giving you a very nice nest egg which you can benefit from, while you are still alive.
Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.
When buying life insurance its vital you get the right policy for your needs. With a plethora of web sites offering discount life insurance, it's often easy to end up with a policy that is not suited to your unique needs and circumstances.
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.
This means that term life insurance only offers protection for the duration of the mortgage, and is usually of little value once your mortgage is fully 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 known as level term cover, and it's the most common type. With this form of policy the premium costs are locked in for as long as you hold the policy. In other words, you will pay the same amount throughout the entire term of the policy.Unfortunately, it means that as time goes by you could end up paying more for your life cover. However, the nice thing is that you get the benefit of paying at today's rates. However, bear in mind that over time these rates could fall instead of rise.
* The second type of term life cover is known as escalating term insurance. This type of scheme means that you pay an increasing amount each year, so the payout at death also increases. They are generally low cost policies, and are more suited to first time buyers and the young. However, they can become more expensive as you get older.
* 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 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 & it's Advantages:
Whole of life insurance covers you right up until the time of your death, providing that you keep paying your premiums. It can give a considerable lump sum to your family when you die, and it normally accumulates in value over the years.
Whole of life policies can be more expensive and more complicated than term life insurance. Also, the investment you make can earn some interest each year. Therefore, since your investment generally grows each year, your premiums can actually reduce over time. You may also reach a time where the interest gained covers all the future premiums, which means you may have no more premiums to pay.
However, it's important to understand that it is possible the cash-in-value of a whole of life policy may actually be less than the amount put 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, you might like to consider a policy that grows in value over time, giving you a very nice nest egg which you can benefit from, while you are still alive.
Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.
About the Author:
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
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