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.
One of the questions that arise time and again is whether a term life policy or a whole of life policy is best, and what’s the difference between them.
Term Life Insurance:
Term life insurance is a bit like leasing a car. You pay cover for a predefined term, and are covered for that term. However, at the end of the term, whether for example its 15 years or 30 years the deal is done and you simply walk away.
Term life insurance only offers protection for the duration of the mortgage, and can be of little value when once your mortgage is paid up.
Term insurance is generally cheap and is expected to fall over time providing you don’t suffer from a major disease. However, there are a number of different types of term life insurance policy:
* The first is known as level term cover, and it’s the most common type. With this form of policy the premium costs are locked in for as long as you hold the policy. In other words, you will pay the same amount throughout the entire term of the policy.Unfortunately, it means that as time goes by you could end up paying more for your life cover. However, the nice thing is that you get the benefit of paying at today’s rates. However, bear in mind that over time these rates could fall instead of rise.
* 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 of term cover is known as decreasing term insurance. With this type of policy the monthly/annual payments stay exactly the same. However, the amount of protection reduces 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 of term life insurance is known as convertible term insurance. This type of term life policy provides a way for you to convert your policy into an investment/insurance policy in the future. With this type of policy the price of your future investment policy is based on your health when you bought the cheaper term insurance.
Whole of Life Insurance:
A whole of life policy can be more complicated and more expensive than term life insurance. However, a whole of life insurance policy covers you up until the time of your death, providing that you keep paying your premiums!. The advantage of these types of policy is that your family could receive a considerable lump sum when you die.
The amount generally increases in value over the years. Also, the contributions you make to your policy normally earn interest each year. When this happens, your premiums may reduce over time, to the point where you no longer have any more premiums to pay.
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.
There are advantages and disadvantages to both forms of insurance, so it’s always important to get advice from a competent insurance adviser.
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