Helpful Information About Auto Insurance
Term Life vs Whole Life
While determining the difference between whole and term life insurance is relatively easy, many people look for minute details that almost put them at such opposite ends that nearly enemy camps have emerged - the "terms" and "perms," with each group strongly advocating for one option.
The "terms" advocate for term life insurance, arguing that it offers the best opportunity to secure life insurance cheaply. As a result, the remaining resources can be used to invest in other things like stocks or mutual funds. On the other hand, the "perms" argue that whole life insurance has a cash-value element in addition to its longevity, both of which make it give more value.
However, it is important to realize that no single solution is ideal for all situations and personal insurance protection needs will determine the better choice between the two. This means life insurance buyers must be aware of the features of each method to make a good choice.
Whole Life Insurance
Whole life insurance offers relative permanence and guarantees lifelong coverage. The coverage remains active until the insured individual turns 100 years old, an age that only a few people reach.
Whole life insurance provides a cash-value element that is associated with other forms of permanent life insurance. This is whereby part of the premiums can be accumulated on the basis of tax deferment to be used for different purposes.
A number of financial planners consider this element as a good form of investment because it allows the policyholder to use the cash value in a variety of ways, including creating children's educational fund, using as collateral when applying for loans, borrowing against it or simply withdrawing it.
With participating whole life policies, the policyholders have the opportunity to get dividends when their insurers record good financial years, as is the case with stocks and shares.
The premiums determined are not influenced by the insured's state of health or other external factors. The premium amounts are relatively higher than term policy ones within the initial years but the rates come down as the years pass.
Term Life Insurance
There are instances in which people may require life insurance for short periods due to a variety of reasons. Such instances are suited for term life insurance, which is purchased for a specified duration.
Although the policies are generally cheaper for young applicants, the rates tend to increase with age. There is no cash-value associated with this type of life insurance and it does not provide any guarantee for living benefits. When its term ends, the policy expires without any residual value. The benefits are only paid if the insured passes away when the policy is still in force.
These are the basic characteristics of whole life insurance and term life insurance. Each type of policy has its own benefits and drawbacks and there is no better option between them that fits all circumstances. It is therefore important to know their features, uses and benefits to make a wise choice when shopping for life insurance.