In modern times, there are many different types of life insurance to choose from. Term life insurance, whole life insurance, and universal life insurance are the most popular types of products. This can be a bit confusing to those who are seeking to purchase life insurance. There's a great deal of information on the web regarding these matters. Unfortunately, much of it is misinformation that's designed to steer a customer towards a particular product. This informative article will explain the differences between these policies and highlight the benefits of whole life insurance. For those who need a quick summary, here are some of the key advantages and benefits to whole life insurance:
- Level premiums
- Guaranteed cash value
- Policy loans
- Stable death benefit
Why You Need Life Insurance
It's important to explain the purpose of life insurance. Many people purchase life insurance for the protection of their loved ones in the event that they pass away. Others purchase it to cover their debts and preserve their estates. There's also an increasing trend of consumers that purchase life insurance to leave a legacy. In order to purchase life insurance and name an individual as a beneficiary, the insured party must be able to establish a relationship between the parties. They must demonstrate that there would be some reason that the beneficiary relies on the insured from a financial standpoint. Many relationships would automatically qualify such as a child or a spouse. This is to prevent others from purchasing life insurance and essentially wagering on one's life for financial gain.
Closer Look at Different Policy Types
Term life insurance is one of the most commonly marketed types of insurance. With term life insurance, the insured purchases a policy for a specified period of time. This can be as short as one year and up to 20 years and more. The insured pays premiums to keep the coverage in force. If the insured is not deceased at the end of the time period, there's no gain. The insured would have to purchase new insurance at the end of the term to continue being covered. While this option may be the cheapest, it's also only temporary and not considered a liquid asset. Another drawback to this type of policy is that the insured will most likely have to prove insurability through a medical check up upon renewing the policy, since this is not a type of life insurance with no medical exam. If the insured has developed health or lifestyle issues during the interim, this can become cost prohibitive.
Advantages of Whole Life Policies
The benefits of whole life insurance vary significantly from the benefits of term life insurance. Whole life insurance is also marketed as permanent life insurance. With this type of policy, the insured typically pays a level premium regardless of their age. The coverage lasts for their entire lives without having to prove insurability. This is greatly beneficial when the policy owner is older as that's when many health problems may surface. The policy provides both a death benefit and cash value. Since the policy is considered a liquid asset, the policy owner can take out a loan on the policy or use it as collateral to secure financing. The loans that are provided must be repaid in order to maintain the death benefit. The death benefit is reduced should the policy owner default on the loan. The premiums with this type of policy are typically a little higher than with term life insurance. However, many consumers view whole life insurance as a worthwhile investment.
Comparing Whole Life Benefits to Term Benefits
|Whole life policy||Term life policy|
|Length||Remainder of your life||Typically 10-30 years|
|Premium price||Typically more expensive||Typically less expensive|
|Other benefits||Guaranteed benefit payout on current policies||Able to convert it to whole life|
Other Options for Coverage
Universal life insurance is another option when it comes to life insurance. This policy provides many of the benefits of whole life insurance with flexibility when making premium payments. While this is a major benefit to those who may not be able to make regular premium payments, there are other factors to take into account. With a universal life policy, the owner must not deplete the cash value to keep the policy in force. When payments are skipped, the owner uses the cash value in the policy to pay the premiums. Depending on the product, this may quickly lead to not being covered at all. The death benefit is also reduced when loans or premium payments are taken from the policy. It's also important to note that any loans on insurance are made by the insurer and the policy is used as collateral to secure the loan.
Talk To An Agent About Whole Life Policies
Whole life insurance provides significant advantages when compared to its counterparts. The cash value is an option that many people want as a part of their policy. Being able to use the money in an emergency also gives consumers the peace of mind that they'll be able to take care of these matters. There are also several sub-products that are whole life insurance based. Burial or final expense insurance is considered to be a small whole life insurance policy that provides quick funding to pay for any funeral expenses. Children's policies are also similar and can be beneficial to the insured later in life if they want to increase the value of the insurance at a much lower rate. Overall, whole life insurance is a good choice for consumers that value the stability of a level premium and a guaranteed death benefit.
To find out if the benefits of whole life insurance outweigh the benefits of other life insurance policies and to be sure that it is the best option for you, consider finding a life insurance agent online to get the expert help you need to be positive about your decision making.