Term Life Insurance vs Whole of Life Insurance

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Term Life Insurance vs Whole of Life Insurance
Words: 645 | Date: Fri, 7 May 2010

When looking for life insurance, it's important to find the best policy for your own unique needs. There are so many web sites offering online discount life insurance, so it's a common mistake made by many, to end up with a policy that's not suitable.

There are a variety of life insurance policies available, so it's important to understand the differences.

Term Life Insurance:

Term life policies cover you a predefined term.

This means that term life insurance only offers protection for the duration of the mortgage, and is usually of little value once your mortgage is fully paid off.

Term insurance is also cheap, and can even become cheaper over time. There are also a number of different types of term life insurance to choose from as follows:

* The first is level term insurance, and it is the most popular type of cover. This policy has it's premium costs locked in for the full term of the policy, so you pay the same amount each month for the entire term of the policy.

* The second type is known as escalating term cover. This type of policy can be become expensive in later years, as you generally pay an increasing amount as the policy ages. However, there is an advantage, in that the payout at death also increases. This type of life policy is normally more suited to younger people.

* The third type is known as decreasing term insurance. In this case your monthly payments will stay the same, although the amount of cover you receive will reduce each year.

* The forth type of term life insurance is what's known as increasing term insurance. Here the lump sum payable at death increases each year. This increase in value of the policy is made up by increasing the premiums periodically over the years.

* The fifth and final type is known as convertible term insurance. It is a type of term life insurance that you can convert at a later stage into an investment vehicle. The value of the investment is normally based on your health when you originally took out the policy.

Whole of Life Insurance:

Whole of life cover covers you right up until your death. Provided, of course, that you keep paying your premiums! It can pay out a substantial benefit to your loved ones when you die, and it can also accumulate a cash value over time.

This type of policy is more expensive and complicated than term life policies. The investment you make earns some interest each year. So, providing your investment grows, your annual premiums can actually reduce over time. Also, there may come a time when the interest produced can cover all your future premiums, and as a result you may have no more premiums to pay on your policy.

However, understand that it is possible that the final value of a whole of life insurance policy may not be the same as the amount of money invested in it over the years.

Summary:

The decision of whether to buy a term life policy, or whole of life cover comes down to your own unique needs, and circumstances, and what you wish to achieve.

The simplest form of life insurance is a level term policy with renewable option. This allows you to buy life cover for as long as you may require it.

On the other hand, a whole of life policy might suit you better if you need a policy that grows in value over the years.

Both types of policy have advantages and disadvantages, and that's why it's always a good idea to get advice from a competent insurance adviser.
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Article Source: Article Directory | Author Michael Pettigrew | Cheap WebHosting

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