Life Insurance: Whole Life Vs. Term Life

If you’re thinking about getting life insurance, the first thing you should know is that life insurance comes in two basic types. Those types are whole life insurance and term life insurance, and the primary difference between them is that term insurance covers only a specific period of time. This is usually one to three decades.

In addition to providing coverage for a lifetime (or until the policyholder reaches 100), whole life insurance also builds up cash value over time. Coverage remains in effect for the policyholder as long as premiums continue to be paid.

With this kind of insurance you’ll be paying an unchanging amount of money over your life, rather than increasing payments as would occur with term life policies. Furthermore, the value on whole life insurance is a guarantee, rather than the gamble that term insurance is. In both sorts of policies, however, you do have to pay the full premium, or your insurance will expire.

Whole-life insurance policies are well-suited towards long-term goals due to the permanence of their protection, the fixed premiums, and the building cash value. This cash value can be received in full at any time the policyholder chooses to cancel their whole life insurance policy.

Whole life insurance policies can be a good investment vehicle. Supporters even argue the cash value should compete with other fixed income investments. A policyholder can end up with a higher cash value than the guaranteed amount (variable policies do not carry guaranteed cash values) if the market performs well or the interest credit rating of the insurer strengthens. Policyholder’s also have the right to borrow against the cash value of the whole life insurance policy enhancing one’s credit profile.

A useful and profitable facet of being a whole life policy owner is the chance to acquire dividends. Insurance companies determines the earnings for their policies on a basis of the overall return they can get on their investments. Also, whole life insurance benefits from having its interest adjusted only on a yearly basis, whereas other kinds of insurance policies, such as universal life insurance, are frequently adjusted on a month to month basis, making them harder to keep up with and calculate their worth versus cost. As with all forms of insurance, whole life insurance benefits from a great many different options in policy.

You should not purchase whole life insurance if you cannot afford it or if there is a good chance that you may not be able to afford it in the future. It’s best, however, to purchase life insurance while you are still young. If term life insurance is all that you are able to afford, that’s better than no policy at all. The higher premiums found on whole life insurance are because they do cover you for the whole of your life; making it worth the higher costs if you are able to afford it. But whatever policy you choose, be sure that you can indeed afford it. Whole-life premiums will never change, and while this is good if you can afford it in the first place, if you cannot it can be very bad. Get life insurance, but get what you can afford. Any coverage is better than none at all.