You can stop worrying if you’re still unsure whether to purchase term or whole life. I will show you the difference between term and whole life.
Both term and whole life have the same objective – financial coverage during times of catastrophe. However if you look into details, you’ll discover a vast differences. This article will show you how to make an informed choice.
Term Life Insurance
The term insurance policy only lasts for a certain period. Normal coverage periods range from 5 to 20 years. Some policies are available for up to 25 or 30 years, but they are rarely purchased.
Premiums can be paid annually or in one lump-sum. If there is no event during the time a person has been covered, then the premiums will not be paid.
The cost of a term policy is usually lower than that of a whole-life policy. It is also considered an entry-level type. The insured can buy a sum assured that is many times the value of their own life. If disaster strikes, they will receive the sum assured.
The premiums will remain constant, but they may increase with age. The payment can also increase if an individual’s health declines.
This type of insurance remains popular despite the restrictions. The sum assured is high and only requires a small amount to be invested. Most people buy because of this factor.
The showdown between Term vs Whole Life Insurance will continue with the presentation of whole life insurance.
Whole Life Insurance
Whole life insurance is for your entire life, as the name suggests. The whole life policy is more complex than the term insurance. You can view it as a dual objective – both protection and investment. It is because, unlike term insurance, the whole life policy will protect you while also accumulating cash value over time. Cash value is normally accumulated over a long period of time and not in a short one.
Whole life insurance is classified into 3 main categories. These can then be subdivided further into segments that are guaranteed or not.
Traditional Whole Life
This plan is usually guaranteed, and it will give you cash value over the long-term. Subscribers to this plan will be entitled to dividends and participate in the investment of the insurance company. Dividends will be earned and increase both the cash value as well as the sum assured.
You can withdraw the cash value in times of need to cover any immediate financial needs. The money you withdraw will not be reimbursed if a disaster occurs.
Universal Life
This insurance does not pay dividends, but instead distributes interest annually. The interest will also be added to your sum assured, so that you will have a greater coverage over time. You can also use the cash value for any emergency needs.
Variable Life
Individuals must choose the investment combination that best suits their risk tolerance. Those who cannot accept risk in their investment should not invest. When the bull market is in full swing, and the investment is made correctly, such policies can yield very high returns. Know what you’re investing in and the risks involved.
After I have shown you how to differentiate between whole-life and life insurance, you can judge for yourself which policy suits you best.
The showdown between whole and term life insurance is over. I hope you learned a great deal from this article.
