The Two Most Popular Life Insurance Policies
There typically two types of life insurance that people compare when considering their purchasing life insurance, whole life insurance and term life insurance. While there are many differences between the these two types of life insurance coverage, the biggest difference is the fact that term life insurance is for a certain time period of years, whereas whole life insurance is a complete life long type of coverage.
Term Life Insurance
Term life insurance is largely inexpensive compared to a whole life insurance plan, especially when someone is younger. One unfortunate thing about term insurance is the fact that there is an age cut off to where you can no longer apply. The cut off age may vary a bit depending upon the individual term life insurance company.
Term life insurance allows you to buy insurance for a certain term or number of years. While the person must pass away during this term for any pay out to take place, it can be helpful for those who need life insurance immediately, but may want to switch policies, or cannot yet afford a more comprehensive policy. The period for term coverage is usually 20-30 years, this can, however, be even shorter. The term is supposed to be helpful to whatever your needs are. In the end, this is what makes term life insurance more cost effective; you’re only paying for a certain amount of time. This allows you to pay a minimal amount over a shorter period of time, instead of going with a larger premium over an extended period of time.
This is where a negative of term life insurance comes in, however. This is not an investment vehicle such as whole life insurance. You cannot take the money out as a loan with a term life insurance policy because you are not paying premiums that accumulate cash value. Because of this lack of extra, the loan is only good for the term that you purchase it in. At the end of a term, you can rollover into a new coverage plan, however.
Whole Life Insurance
The major benefit of whole life insurance is that you are making payments while accumulating cash value. Much like a house, you can actually take out a loan for money needs when you’ve paid enough into the whole life insurance policy. It allows you to take some out, like a loan, and pay it back in, when you need to do so. This is something that available with term life insurance policy. Whole life insurance offers this benefit because you are paying into it for your whole life. There is no specified term, but this type of policy is life insurance wrapped around continuous payment until you pass away.
This highlights one of the major negative aspects of whole life insurance, however. It can be very expensive. Because you’re paying for a cash value investment as well, you’re paying double. You pay for the investment, as well as the actual insurance itself. Because you’re paying for two, the rates can be considerably more expensive than term life insurance policies. This could be a great benefit (saving on top of insuring), but it becomes cloudy due somewhat to the fees and commissions that come from the insurance plan itself.
Term life insurance and whole life insurance can be beneficial in different ways. For someone who has a lot of money, and would like to jump into another investment, whole life insurance is easily the way to go. If someone does not have as much money, but would still like to be covered, term life insurance can help them get the coverage they need without completely breaking the bank.