The search for life insurance can be frustrating and confusing, so it’s important to get the best policy for your own unique needs and circumstances. So many web sites offer discount life insurance, and as a result people often end up with a policy not suited to their needs.
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 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.
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 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.
* Next, we have decreasing term insurance, and in this type of policy monthly payments stay the same, although the amount of cover reduces each year.
* The forth type of term life cover is increasing term insurance, where the pay out on death increases. However, to make up for this increase it will be necessary to increase the premiums from time to time, in line with changing circumstances.
* 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:
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.
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 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.
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.
However, you may prefer a policy that offers a growing nest egg, that pays out while you are still around to enjoy it!
Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.
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