An overview of the available types will be helpful if you are considering purchasing life insurance. In this article, you will learn about the variations on whole life insurance as well as the difference between whole and term life insurance.
The easiest way to understand the difference between whole life insurance and term life insurance is to look at what is meant by their names. When you purchase whole life insurance, it will pay a benefit when you die and as long as you own the policy, then you are covering your whole life. The value of the policy at the time of your death is what that benefit will depend on but even if you are no longer making payments on it, you still own the policy. Also accumulating a cash value on a tax-deferred basis is whole life insurance. In addition, whole life can pay dividends throughout the life of the policy.
On the other hand, term life insurance is purchased for a certain term or period. As long as you die within the term or period, then an agreed upon amount is what term life insurance will pay to your beneficiaries. If you die after the term has expired or if you cease to make payments, then this insurance will not pay. In addition, term life insurance has no cash value.
There are two other aspects of whole versus term life insurance that needs to be pointed out. Premiums for whole life insurance are higher to begin with but remain steady over time and this is the first aspect you need to know about. On the other hand, the premiums for term life insurance will increase over time even though they are lower near the beginning of the policy.
Being able to borrow against the cash value of a whole life insurance policy is another aspect. Since term life insurance does not have a cash value, this aspect is therefore not possible.
Whole life insurance has two variations and you need to consider them as well. The first is universal life insurance which is a more flexible form of whole life insurance. In order to suit your financial situation, universal life insurance will allow you to adjust, within certain limits, the premiums and the amount of benefit. By placing premiums in a fund that accumulates based on the interest rate, this is then made possible. This type of policy, just like a normal life insurance, has a cash value that can be borrowed against.
On whole life insurance, the second variation is called variable life insurance. Other than the fact that the premiums in the fund are tied to the financial markets instead rather than to interest rates, this type is similar to universal life insurance. The potential for loss is greater in this type of insurance but the potential for growth is greater as well.
You may have noticed that when it comes to purchasing life insurance policy, there are some choices that need to be made.
The easiest way to understand the difference between whole life insurance and term life insurance is to look at what is meant by their names. When you purchase whole life insurance, it will pay a benefit when you die and as long as you own the policy, then you are covering your whole life. The value of the policy at the time of your death is what that benefit will depend on but even if you are no longer making payments on it, you still own the policy. Also accumulating a cash value on a tax-deferred basis is whole life insurance. In addition, whole life can pay dividends throughout the life of the policy.
On the other hand, term life insurance is purchased for a certain term or period. As long as you die within the term or period, then an agreed upon amount is what term life insurance will pay to your beneficiaries. If you die after the term has expired or if you cease to make payments, then this insurance will not pay. In addition, term life insurance has no cash value.
There are two other aspects of whole versus term life insurance that needs to be pointed out. Premiums for whole life insurance are higher to begin with but remain steady over time and this is the first aspect you need to know about. On the other hand, the premiums for term life insurance will increase over time even though they are lower near the beginning of the policy.
Being able to borrow against the cash value of a whole life insurance policy is another aspect. Since term life insurance does not have a cash value, this aspect is therefore not possible.
Whole life insurance has two variations and you need to consider them as well. The first is universal life insurance which is a more flexible form of whole life insurance. In order to suit your financial situation, universal life insurance will allow you to adjust, within certain limits, the premiums and the amount of benefit. By placing premiums in a fund that accumulates based on the interest rate, this is then made possible. This type of policy, just like a normal life insurance, has a cash value that can be borrowed against.
On whole life insurance, the second variation is called variable life insurance. Other than the fact that the premiums in the fund are tied to the financial markets instead rather than to interest rates, this type is similar to universal life insurance. The potential for loss is greater in this type of insurance but the potential for growth is greater as well.
You may have noticed that when it comes to purchasing life insurance policy, there are some choices that need to be made.
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2 comments:
I have been trying to fine life insurance cover that would accept me, due to a medical condition i have had since birth a lot of companies could not accept me or there cost were so high i could not afford them. Do you know any life insurance cover that deals with long term complex medical conditions
Great blog, I totally agree. I was finally able to find Universal Life Insurance
that worked for me at http://www.lifeinsure.com/.
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