Term Life Insurance Articles
Whole vs. Term Life Insurance
2010-01-07
Anyone who has never had to face the whole versus term life insurance tradeoff understands that the lifetime costs can vary greatly. The wrong insurance policy can wreck your financial plans because you end paying sizeable premiums that don't make complete sense. Therefore, the first decision you need to make is this: whole or term life insurance?
Whole Life Insurance
A whole life insurance policy is one which provides coverage throughout the life of the insured. This insurance policy requires that premiums be paid every year. One of the most attractive features of a whole life insurance policy is the cash value that it accrues over time. This money is paid by the insurance company and is a return on the premium that you pay. Unless you withdraw this money or borrow against it, this cash is tax deferred.
Term Life Insurance
This type of life insurance remains in force only for a defined term. The policy is inexpensive no doubt. But, if the policy lapses, the insured will be left with zero coverage, in case of an emergency.
Benefits of Whole Life Insurance Policies
A small portion of the money you pay as a premium goes towards the cash value. This cash value will build upon itself and you may very well be able to make policy payments using this down the road. Another benefit is that unlike term insurance policies, your premium amounts for whole life insurance policies remain constant throughout your life, unless you opt for a change. Whole life coverage has benefits, both in terms of the health of the insured as well as tax savings.
Whole Life Insurance as an Investment
Viewed purely as an investment, whole life insurance is rather unattractive because it offers low rates of return when compared to other investments. Life insurance policies must be purchased for the coverage they provide and not as an investment tool. Of course, if you hold the insurance policy for a long enough period, you can get a good deal out of the investment. However, this depends on a number of factors like your age, health, the insurance company, dividend rates, interest and so forth.
So, What is the Confusion?
Whole life insurance policies are a lot more expensive than simple term insurance policies. And this is the crux of the debate. Should you pay more money and buy whole life insurance or pay low premiums and buy term life insurance? It must be remembered that whole life insurance has certain unique features that make it a wonderful option for people to protect their loved ones and their investment. Besides, some amount of the premium you pay goes towards building the cash value of the policy. The longer you hold the policy, the higher will be the cash value. So, even though your initial premium on whole life insurance will be much higher than the premium on a term insurance policy, you will find that over the years, there are several benefits accumulating from whole life insurance.
Free Insurance Quotes
Anyone who has never had to face the whole versus term life insurance tradeoff understands that the lifetime costs can vary greatly. The wrong insurance policy can wreck your financial plans because you end paying sizeable premiums that don't make complete sense. Therefore, the first decision you need to make is this: whole or term life insurance?
Whole Life Insurance
A whole life insurance policy is one which provides coverage throughout the life of the insured. This insurance policy requires that premiums be paid every year. One of the most attractive features of a whole life insurance policy is the cash value that it accrues over time. This money is paid by the insurance company and is a return on the premium that you pay. Unless you withdraw this money or borrow against it, this cash is tax deferred.
Term Life Insurance
This type of life insurance remains in force only for a defined term. The policy is inexpensive no doubt. But, if the policy lapses, the insured will be left with zero coverage, in case of an emergency.
Benefits of Whole Life Insurance Policies
A small portion of the money you pay as a premium goes towards the cash value. This cash value will build upon itself and you may very well be able to make policy payments using this down the road. Another benefit is that unlike term insurance policies, your premium amounts for whole life insurance policies remain constant throughout your life, unless you opt for a change. Whole life coverage has benefits, both in terms of the health of the insured as well as tax savings.
Whole Life Insurance as an Investment
Viewed purely as an investment, whole life insurance is rather unattractive because it offers low rates of return when compared to other investments. Life insurance policies must be purchased for the coverage they provide and not as an investment tool. Of course, if you hold the insurance policy for a long enough period, you can get a good deal out of the investment. However, this depends on a number of factors like your age, health, the insurance company, dividend rates, interest and so forth.
So, What is the Confusion?
Whole life insurance policies are a lot more expensive than simple term insurance policies. And this is the crux of the debate. Should you pay more money and buy whole life insurance or pay low premiums and buy term life insurance? It must be remembered that whole life insurance has certain unique features that make it a wonderful option for people to protect their loved ones and their investment. Besides, some amount of the premium you pay goes towards building the cash value of the policy. The longer you hold the policy, the higher will be the cash value. So, even though your initial premium on whole life insurance will be much higher than the premium on a term insurance policy, you will find that over the years, there are several benefits accumulating from whole life insurance.
