When investigating life insurance to find a policy that best fits an individual’s needs, it becomes quickly apparent that the researcher needs to understand the differences between term life vs. whole life insurance policies. There are further subcategories below both of these types, but just understanding the difference between them can go a long way towards finding the best policy. A reputable insurance agent will probably offer both kinds of coverage and can further clarify any regulations on term life insurance vs. whole life insurance.
First, consider the coverage provided by a whole life insurance policy. This policy is designed to be held for your entire life. Initially whole life will have a higher yearly premium than term life because the company is taking the money and investing it in a kind of savings account. Once the savings account is accruing interest yearly premiums will go down until eventually they could overtake the premiums and nothing would be owed for the year, even though the coverage remains in place. This sounds like a great idea, but usually the company only pays out a small amount of interest for the money saved and it would take a long time to see much of any real benefit, so the serious investor would do better to invest the money on their own.
Two variations of whole life insurance are universal and variable policies. According to a universal life insurance policy if the company accrues large gains on the policy holder’s money during that year they would pass gains on to the policy holders. With a variable life insurance policy, the money is invested in accounts that look like mutual funds and the policy holder determines what accounts they want to invest. However, with any investment that offers possibility for great gains, there is also a greater risk taken. During the years that the funds or the life insurance company does not do very well the individual policy holder can owe more than budgeted.
There are other options available though, under the category of term life insurance. Term life policies cover the insured for a determined length of time while they are actively paying the premiums, after which benefits expire. Variations on term life policies typically involve what kind of a term they are set up to cover. When an individual is young and in good health, they can purchase a level term policy that will have the same premium and death benefit rate for up to 20 years. An annual renewable term life insurance would come up for renewal each year and will have steady rate increases. To combat raising premium costs decreasing term life insurance can be selected. It will pay out less as the policyholder ages with the expectation that financial obligations go down as you enter retirement.
When considering term life vs. whole life insurance plans keep in mind the length of benefit as well as premium costs, current health and the death benefit needs of the beneficiary. There are many pros and cons to either term or whole life insurance, and they would both be a huge benefit to a person under different circumstances.
First, consider the coverage provided by a whole life insurance policy. This policy is designed to be held for your entire life. Initially whole life will have a higher yearly premium than term life because the company is taking the money and investing it in a kind of savings account. Once the savings account is accruing interest yearly premiums will go down until eventually they could overtake the premiums and nothing would be owed for the year, even though the coverage remains in place. This sounds like a great idea, but usually the company only pays out a small amount of interest for the money saved and it would take a long time to see much of any real benefit, so the serious investor would do better to invest the money on their own.
Two variations of whole life insurance are universal and variable policies. According to a universal life insurance policy if the company accrues large gains on the policy holder’s money during that year they would pass gains on to the policy holders. With a variable life insurance policy, the money is invested in accounts that look like mutual funds and the policy holder determines what accounts they want to invest. However, with any investment that offers possibility for great gains, there is also a greater risk taken. During the years that the funds or the life insurance company does not do very well the individual policy holder can owe more than budgeted.
There are other options available though, under the category of term life insurance. Term life policies cover the insured for a determined length of time while they are actively paying the premiums, after which benefits expire. Variations on term life policies typically involve what kind of a term they are set up to cover. When an individual is young and in good health, they can purchase a level term policy that will have the same premium and death benefit rate for up to 20 years. An annual renewable term life insurance would come up for renewal each year and will have steady rate increases. To combat raising premium costs decreasing term life insurance can be selected. It will pay out less as the policyholder ages with the expectation that financial obligations go down as you enter retirement.
When considering term life vs. whole life insurance plans keep in mind the length of benefit as well as premium costs, current health and the death benefit needs of the beneficiary. There are many pros and cons to either term or whole life insurance, and they would both be a huge benefit to a person under different circumstances.
No comments:
Post a Comment