Term and whole life insurance policies – Choosing the right one
Guest post by: “Max Snyder a freelance writer and a blogger
Human life has always been priceless. This is a fact that has gained a hell lot of importance with time. Life insurance is the biggest proof of all. It is through life insurance policies that people are now able to make sure the future of their near and dear ones stay well protected in case of any unfortunate accident. The most important thing that one must focus on while looking for life insurance policies is nothing but the term of the insurance policy in question. Well, it’s equally important that you try to know the differences between the different types of insurances available. This will make sure you’re able to get the most suitable form of insurance for yourself.
Term and Whole life Insurance
In a term life insurance, you’re only going to get life coverage. The policy’s face amount is paid to the beneficiary upon the death of the person insured. The duration of the term can vary from 1 to 30 years. Whole life insurance, on the other hand, differs slightly from its term counterpart. In a whole life insurance, there is an investment component attached to the term policy. This makes it clear that the investment is surely going to be in stocks, bonds or any of the money market instruments.
Whole life insurance allows your policy to build up cash value over a certain period of time. The cash value is something that you can borrow money against. There are 3 common types of whole life insurance policies available at present:
- Traditional whole life policies.
- Universal whole life policies.
- Variable whole life policies.
You’re allowed to lock in the monthly payment over the total life of the policy in both term and whole life insurances. It’s important that you decide on the amount of life insurance. That’s when you’ll be able to figure out the amount that you want to lock in your monthly payment. There is one thing that you need to focus on as you choose between term and whole life insurance policies.
Whole life insurance – Expensiveness
Since the whole life policies come with investment portion attached with them, they tend to be more expensive than their term life counterparts. Well, the extra money that you’ve to pay in whole life insurance policies will be worth paying if you’re able to get a handsome return. Unfortunately, there isn’t much that you can make of the whole life insurance policies as investment vehicles. These are mostly known as retirement plans. The extra sum that you pay is actually making you save money for your retirement years.
It’s true that whole life policies help you save for retirement. Nevertheless, you’d want to consider the high fees that it carries along. The total charges can even go as high as 3% points with respect to the annual return. This isn’t the end of the story. The commissions being up-front and hidden, you won’t be able to trace the fact that you’re being charged as high as 100% on your first year premiums. As if these weren’t enough, it’s also very difficult to make predictions on the investment returns. The division of the amount you pay between the insurance and investment continues to remain unclear.
Term life insurance – Easy on the pocket
If you’re in good health and aged below 50, you don’t have to worry the least about the term insurance premiums. They tend to be well within the limits of your affordability. But it’s true that the premiums take the upward route as a person ages.
Whole life insurance policies are mostly preferred by people looking for coverage while in their 60s. This is because of the fact that they are left with no choice to be exact. There are companies that are generally reluctant to the selling of term policies to people aged 65 or above. Make sure you do proper researches before buying a life insurance policy.
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