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.
Whole life insurance policies remain in place as long as the premiums are paid, or until the covered person reaches the age of 100 years. These types of policy begin to build up a cash value that increases as long as they exist, starting usually after the first year the policy is paid for.
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 is a good option to consider for individual long range financial planning. Whole life insurance brings security of permanent lifetime insurance protection coupled with the ability to cancel or surrender the policy at any time for cash. In addition, there are tax advantages to whole life insurance allowing policyholders to save money overtime on a tax deferred basis.
With certain whole-life insurance policies, there is the possibility of gaining more cash value than what the company guarantees that you will receive. You are able to get loans to borrow from this amount. However, the guaranteed cash value depends on the life insurance market as a whole as well as your own interest rates. The company’s future financial ups and downs may also affect the amount of guaranteed cash value. However, variable life insurance policies lack a guarantee at all, making whole-life policies generally safer. Advocates of whole-life policies suggest that you insure that your rates can compete well with your other investments.
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.
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