Term or Whole Life – Which Will You Choose?

A lot of individuals decide to carry life insurance in the event their passing leaves their loved ones in need of money to meet their daily needs.  Sometimes life insurance is provided by the person’s employer as part of the benefits package.  However, other individuals take out their own additional policy or their only policy through a particular insurance company.  When deciding on life insurance, there are two main types of life insurance policies available:  term and whole life insurance.

How Whole Life Works:

Whole life insurance was developed as an answer to the earliest term life insurance which was not appealing to most individuals who took out term life policies.  Term life was the first kind of life insurance and would only pay if someone passed away within a certain time frame while the policy was still being paid for.  Understandably, a lot of customers were quite upset about paying for decades only to find out the insurance was not there when they needed it the most. There are many advantages of whole life insurance

Whole life insurance is very different than term life insurance.  It allows a cash value to build up over the life of the policy.  This means that the insured individual can borrow against their own policy, take out the cash and pay it back over time.  If the individual does not pay back the loan, that amount is deducted from the lump sum that the beneficiary receives upon the person’s death.  So, for example, if an individual has a 100,000 life insurance policy and borrows 10,000 which is never paid back, the beneficiaries will receive a death benefit pay out of 90,000.

Whole Life Mandates:

The main requirement of whole life insurance is that premiums, the payments for the insurance, must be paid each and every month for the life of the policy.  There is no exception to this requirement.  If the monthly payments are not made to keep the policy current, it may be cancelled by the insurance carrier.  In addition, the insurance company must make a guarantee to each of its customers that the cash value of their individual policy must increase each year, even if the insurance company’s bottom line does not increase in that time period.  This is important because everyone who takes out whole life insurance wants to have that cash value in place, in the event of an emergency or another need for cash. After all, this is one of the main reasons why an individual takes out this type of insurance policy rather than a term life insurance policy.

Do  Your Research:

Obtaining a life insurance policy is a personal thing.  Take the time to do your own research to determine what type of policy is right for you and what insurance company is offering you what you need.  Talk to an insurance agent.  He  should be able to give you some down-to-earth  information on how whole life insurance operates, and whether it is the best choice for you, your lifestyle and your family’s needs.  After all,  isn’t your family the reason for the life insurance in the first place?

Points to Consider When Deciding on Types of Insurance

When trying to compare some of the advantages of whole life insurance and disadvantages against other investments or insurance’s, there are some points that you need to keep in mind. There are some key points that are advantages for the insured while he or she is still living. There are positive’s vs term ins, universal, variable life insurance as well as protection to the family after the death of the insured. Let’s go ahead and try to cover some of these advantages of whole-life-insurance.

• One of the first advantages is the Death Benefit.
• The premium will remain constant
• Accumulating a “Cash value” is another beneficial feature of whole life insurance.
• Participation in whole life assurance policy earns you the dividends.
• Insured for your entire life
• Cash accumulates tax deferred
• Make tax free loans on the cash value
• If you stop making payment, you can receive the cash value or use that cash value to provide a paid up insurance benefit

Overview of Each Advantage

The nice thing about this coverage is you don’t have to worry about having your premium go up, like you do with renewable term life’s insurance. Term life insurance’s premiums increase’s at the time of renewal. The premium that you are going to pay for the whole life policy will remain constant for the life of the policy.

A disadvantage is premiums for whole life insurance can be much higher than premiums you would pay initially for the same amount of term insurance, but they are smaller than the premiums you would eventually pay if you were to keep renewing a term insurance policy until the insured’s later years.  Everyone should know these things before they buy life insurance.

The Cash Value is Nice

You are getting a low risk cash value account. The whole life policy has a cash value feature that is guaranteed. With this type of policy there is a savings feature that will allow you to accumulate a cash value that is on a tax deferred basis. The insured can cancel or even surrender the policy anytime and receive the cash value. There are even some policies that will generate cash values that are larger than the guaranteed amount, depending on different circumstances. The cash values of the variable life insurance policy are not guaranteed. As you can see this type of policy is very flexible. You can even borrow against the policy on a loan basis. The cash value should do well against other fixed income investments.

Don’t forget about the Dividends

With whole life you also earn dividends. The company, depending on how well the company did, will set earnings on the whole life policy. Interest is adjusted on a annual basis compared to universal life that is adjusted monthly. You will receive the dividends in cash and you can purchase further premiums to minimize your premiums in the future.

The Death Benefit will never decrease

The beneficiaries receive the death benefit no matter when the insured dies, as long as premiums were paid. The death benefit will never decrease. There is also no income tax that is due upon death of the insured on the whole life policy. You can also choose to take the death benefit monthly, rather than in a lump sum.

As you can see there are many benefits to and advantages of whole life insurance. The policy will help with ongoing and future family expenses and will help fulfill the financial obligations of the family or dependents when the insured dies. It is best to get a policy when you are young. That way your premium is going to be lower than if you decide to get it when you are older.

The advantage of whole life insurance is that you ensure that you have a life insurance policy in place for your entire life. Just make sure that you can afford the payments, premiums. With the policy having constant premiums and you can accumulate a cash value, the whole life policy is a good choice for your long range goals.

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