Healthy Life

Posts Tagged ‘Term’

Article by David Livingston

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Article by Denise

Life insurance is usually considered a low priority subject for many people. The fact is life insurance, whether it is term or whole life, really does require your understanding to use it properly. Take a moment to see how insurance can be a useful financial product for you and your family.

We will look at the two most common types of life cover, term and whole life.

Whole Life Assurance

The original concept of whole life insurance was to have monetary coverage for surviving partners in case of death, plus a long term savings plan.

What happens is part of your monthly premium goes into a savings account which is part of the policy. When you reach a certain age (usually over 60 years old) you can do a couple of things. You could either cash in your policy for the amount saved, or you could let the cash value continue to pay the premiums for the life portion of the policy.

Cash value is what the savings portion of this type of insurance policy is called. Many of these policies have a borrowing feature. To keep the policy enforced you have to continue paying the monthly premiums, but you still can borrow money against the cash value.

As you can see whole life policies have a lot of flexibility. They cost a little more, but for people who have trouble saving and need a moderate amount of life coverage it is a pretty good product.

Term Insurance

Term insurance is a type of life protection that you essentially rent. These policies can run for a term as long as 20 years. The younger you are the less it costs. Of course your medical condition plays an important role in the calculation of premiums.

Term insurance generally has a specific purpose. For example: You and your partner have a home with a mortgage. You both work and contribute to the monthly mortgage payment. If one person dies, besides the emotional loss there is a financial loss too. Term insurance fills the void in a case like this. The plan is as you pay down your mortgage the need for term insurance diminishes because your debt is less.

Some people who have a lot of money use term insurance to pay for estate taxes when they die.

Term insurance does not have a savings component to it. It is strictly a life policy that ends when the term is over or you quit paying the premiums. There is a form of term insurance where the premiums are higher, but at the end of the term you get all your premiums back in cash.

Recap

There are different variations of the basic term and whole life policies. You really need to assess your situation first, then find the right insurance product that fits your budget and needs.

When you look for life insurance, what are you searching for? Do you decide because of price, quality, or a combination? In today’s economy, many people want the lowest term insurance policy is available. Luckily, you won’t need to sacrifice quality for the best price. With term life insurance, you get the best of both worlds.

With term life insurance, you get the same face amount as a whole insurance policy, but for a much lower price. The lower price is possible because the policy will expire in the future, and there won’t be any cash value that can be taken advantage of.

Many smart shoppers will use the money they save by getting life term insurance as their bright future and put it in an IRA or securities. The money that accumulates in the accounts will often be greater than the cash value that would build up in a whole life term insurance account.

The policy holder often has the choice of not renewing their policy at all.

Don’t just take the lowest price for life term insurance policy. Do your homework. Look at customer reviews and ratings before you decide. This is a vital product for the future of your family. They need you to choose correctly, so take your time.

When you apply, answer every question honestly and completely. Don’t get to the end and find you’ve been turned down by an underwriter. The time you invested in finding the lowest term life insurance will then have been wasted.