It is a common practice among people to have a whole life insurance. In the event of the person’s untimely death, it would secure his family and would also help subsidize their retirement planning. However, when an individual is about to opt for an Insurance plan it gets difficult to decide which one to choose: Term Life or Whole Life. However, a descriptive and detailed knowledge of both will help you take your next step.
Term Life Insurance: It provides an individual with a certain death benefit and provides protection to the individual in return of a premium paid by the policy holder. If at the end of the contract period the insured person is alive, then neither he nor his heirs will have any benefit from the insurance as the there wold be no payment.
Whole Life Insurance: This insurance can be better said as an extended version of the term life insurance. It is designed to increase the investment portion. The face amount is paid off to the beneficiaries in case the person insured is dead or the insured person has attained an age of 100.
An insight in to both the insurance policies will provide you a better view of both. Read the following to know more:
Advantages: A whole life insurance policy provides individual with a living benefit and you do not need to pay any taxes on the cash that keeps building as a profit and the cash can be used as a support while retirement planning. Such benefits are not associated with term life insurance. It just provides actual life insurance coverage with only a death benefit, which can be acquired if someone passes away. As a matter of fact, some buyers do add riders which enables people to access two-thirds of the benefit on account of a terminal illness while the person is still alive. This added advantage is not available with term life insurance.
Durability: Most of the time, term life insurance is referred to a temporary life. There is a specific time period when the premium is level, but later on, the case stands to either the premium becomes unaffordable due to the yearly increase in premium or a termination of the policy takes place. On termination of the policy due to the high premium, the facility of the insurance shall not be available when it would be most needed in a sudden tragic event i.e. death. On the other hand, whole life insurance has a benefit of level premium. In theory, whole life policy can exist forever as the policy premium would never increase. If the first year premium is affordable for people, the can be affordable in future a well.
Dividends: Whole life products has also the facility of dividends. The dividends can be useful to reduce the premium or can be also used to increase the cash within the policy and face amount. Whereas term life insurance has very little or no dividends.
You should buy term life insurance only if you are financially responsible for others. You might buy whole life insurance if your family needs money to pay for estate tax.
When a youngster in his twenties and is having a steady job, it is highly necessary to have a life insurance although the cash flow is low. Many a times. People are advised to sell their term life insurance as the cost is lower. However, an interesting fact is that term life insurance can be converted to whole life insurance without any hurdles of exam. But due to lack of knowledge people are unaware of the benefits of whole life insurance. We need to know each and every facts before purchasing an insurance. A full fledged and in-depth maintenance of our own records will help us discover our own assets, our goals, how much we save on a yearly basis and our initiative into a retirement plan will help us have a concrete decision to opt for Whole Life Insurance or Term Life insurance.