Life Insurance – Term Vs Whole Life Insurance

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There are a few different types of life insurance, such as term, universal and whole. A term assurance policy offers death benefits in the event of your death. A whole assurance policy basically combines term insurance with an investment element that earns interest. In this article we may choose to discuss term life insurance and whole life insurance.

Whole cover definition

A policy consisting of a premium that pays for insurance coverage as well as an investment section that earns interest. An insurance payout is made to the policy's beneficiaries if the policyholder passes away. The policyholder generally pays a level premium for the rest of his life. The policyholder will receive the cash surrender value of the policy if she decides to cancel it.

Term cover definition

This is a type of life assurance that stays in effect for a limited time only. The stated beneficiary receives the death benefit if the policyholder passes away within that limited time. If the policyholder survives that limited time, the policy ends and the stated beneficiary will receive no death compensation. The policyholder may then decide to renew the term life insurance policy or to let the life coverage stop.

Premiums

Whole life insurance premiums are more expensive than limited period life premiums. Post why? You generally pay more because you are not only paying for life coverage, but also for an investment as well. The first annual premium is normally much higher for a whole life policy than for a term life policy. The premiums for whole life stay the same for the policy's duration. Term life premiums increase as time passes.

Policy duration

You should consider buying term life assurance if you plan to keep the policy for less than 10 years. If you live past the time-span of the contract, the named beneficiaries will get no money back. If you keep a permanent life policy long enough, it may become the better alternative. If you should pass away, the cash value is normally paid out tax-free to your beneficiaries.

Investment

You should by no means buy permanent or universal cover exclusively as an investment. You should also reconsider buying universal assurance on children as a way to put aside funds for college tuition. You may consider buying a 10 year life assurance policy if you discover that you do not have the funds for all of the permanent coverage you need. This is the end of this article in which we took a short look at term and whole life insurance.



Source by Gert Hough