Term Life Insurance Articles
Two Reasons To Choose Term Life Insurance Over Whole Life
2010-08-30
If you request a life insurance quote from a provider, one of the first questions you will be asked is whether you are looking for whole life insurance or term life insurance? Many factors determine both the type of life insurance to purchase as well as the cost. In addition, there are a myriad of pros and cons that can be argued for either insurance option. However, term life is the type of insurance that appeals to most people due to lower premiums and variable terms.
The single most important reason for choosing term life insurance is the lower cost. Insurance providers will often try to sell whole life insurance because it is more expensive, and therefore, offers the most profit for the seller. A whole life policy is actually an investment allowing some portion to be cashed out or borrowed against. In order to fund that investment, the provider must charge a higher rate when considering a life insurance quote. A term life policy cannot be cashed out, thus ensuring that all of the money paid into the policy is going towards the actual benefit. The lower premiums of term life insurance are more appealing to younger people at a time in their lives when their daily living expenses are typically higher. They receive the same death benefit as a whole life insurance policy, but at a significantly reduced premium.
As the name suggests, term life insurance has a fixed period. Although the period can vary from 5 to 30 years, term life insurance only provides a death benefit during that term. This is appealing to younger people because they do not need the guarantee of a policy for their entire lives. Coverage is needed when their debt load is highest. Purchasing a 30-year policy while in their mid-20s will allow them to have coverage during the period when they need it the most. Providers know that, historically, only a very small percentage of people in this age range will ever exercise a claim on their term life insurance policy. In contrast, people over the age of 55 would not need that kind of protection because their outstanding debt is not as great. This would be the time purchase a whole life insurance policy, but at a reduced death benefit amount.
Life insurance is meant to provide income replacement and assist with paying off debt in the event that something tragic happens to a loved one or spouse. Whole life insurance and term life insurance both have their place, and it is helpful to know what benefits each type offers when requesting a life insurance quote from an agent.
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If you request a life insurance quote from a provider, one of the first questions you will be asked is whether you are looking for whole life insurance or term life insurance? Many factors determine both the type of life insurance to purchase as well as the cost. In addition, there are a myriad of pros and cons that can be argued for either insurance option. However, term life is the type of insurance that appeals to most people due to lower premiums and variable terms.
The single most important reason for choosing term life insurance is the lower cost. Insurance providers will often try to sell whole life insurance because it is more expensive, and therefore, offers the most profit for the seller. A whole life policy is actually an investment allowing some portion to be cashed out or borrowed against. In order to fund that investment, the provider must charge a higher rate when considering a life insurance quote. A term life policy cannot be cashed out, thus ensuring that all of the money paid into the policy is going towards the actual benefit. The lower premiums of term life insurance are more appealing to younger people at a time in their lives when their daily living expenses are typically higher. They receive the same death benefit as a whole life insurance policy, but at a significantly reduced premium.
As the name suggests, term life insurance has a fixed period. Although the period can vary from 5 to 30 years, term life insurance only provides a death benefit during that term. This is appealing to younger people because they do not need the guarantee of a policy for their entire lives. Coverage is needed when their debt load is highest. Purchasing a 30-year policy while in their mid-20s will allow them to have coverage during the period when they need it the most. Providers know that, historically, only a very small percentage of people in this age range will ever exercise a claim on their term life insurance policy. In contrast, people over the age of 55 would not need that kind of protection because their outstanding debt is not as great. This would be the time purchase a whole life insurance policy, but at a reduced death benefit amount.
Life insurance is meant to provide income replacement and assist with paying off debt in the event that something tragic happens to a loved one or spouse. Whole life insurance and term life insurance both have their place, and it is helpful to know what benefits each type offers when requesting a life insurance quote from an agent.
