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Whole Life Insurance vs Term Life Insurance

The decision to make sure your family are financially secure in the event of your death is a sensible one. Following bereavement, the initial shock of sadness can be met by the shock of debt and costs that the bereaved are unable to meet. The security afforded by an appropriate life insurance policy might give the tangible benefit of money in the event of your death, and will certainly provide you with peace of mind knowing that you are covered. However, deciding on which type of life insurance to purchase can be an important dilemma. Policies can differ substantially, however the major difference to be aware of concerns whole life insurance as opposed to term life insurance and how to find the best life insurance rates.

Advantages to Whole Life Policy

Whole life insurance involves the purchase of cover which is essentially an investment. Though it tends to cost more than term life insurance rates, whole life insurance represents cover that has cash value, and this value can be invested in stocks and securities that can reap further value that will cover you for the long-term. The higher value of the premium is the cost; the potential gain from interest is the benefit. One obtains the peace of mind of knowing your family will receive a sum that could be substantially more than it was originally, if the investments you have chosen reap dividends.

In contrast, term life insurance represents purer cover that does not have cash value in the same way that whole life insurance does. One takes it out for a specified period of time and it is generally used to cover specific costs such as a mortgage, or children's school or university costs. Though the premiums are less than those for whole life insurance, one does not have the potential to gain through these policies: if they are terminated or cancelled, then they have no cash payback. One does, however, obtain peace of mind that in the event of your death specific expenses are covered.

So which policy is best for you? Your circumstances partly dictate this to determine which type of life insurance policy is best for your unique situation. If you can afford whole life insurance then it may be that this is a sound investment: the potential for its value to increase over time may be lucrative. Alternatively, it may be that this form of investment is actually less lucrative than taking out term insurance and investing the money you save from not taking out whole life insurance in whichever investments you choose. Gathering sound financial advice that takes into account your budget and the propensity for different forms of investments to pay off would be advantageous.

Some short-term circumstances may make the lower cost and flexibility of term life insurance beneficial. Young couples with substantial debts owed to mortgages and childcare costs, or older couples near to paying off their mortgage or facing their children's university costs are examples of people who might benefit from the short-term, flexible nature of term life insurance. In contrast, whole life insurance may be favourable for those without such pressing short-term concerns, who seek cover in the long-run against a spread of less closely defined debts and costs.

Thus the decision is one that requires sound thinking and an awareness of the costs and benefits of each type of policy. A good financial advisor would be able to help you go through this process and find the best form of cover given your circumstances.

Difference Between Term Life Insurance

When deciding on the type of life insurance you need, it is important to compare term vs. permanent life insurance in order to select the one that is best for you. Each of these policies has pros and cons associated with them, so it is important to consider your personal life situation and needs when deciding between term vs. permanent life insurance.

A term life insurance policy is in place for only a pre-determined amount of time. Although the most common terms associated with these policies are 10, 15, 20 and 30, it is possible to purchase a term policy for just one year or for as long as 30 years. It is also sometimes possible to purchase a term life insurance policy that will remain in place until you reach a predetermined age. After this period of time is over, your policy is no longer in place.

When you purchase a permanent life insurance policy, on the other hand, it remains in place until you pass away. In addition, a permanent life insurance policy builds cash value that you can borrow against. Therefore, this type of insurance policy is a good choice if you are interested in taking advantage of the tax deferred savings component.

While permanent life insurance offers cash value and will remain in place forever, it is more costly to purchase than term life insurance. At the same time, the premium you pay when you start the policy remains the same for the life of the policy. Therefore, while it may be more costly at first, it may ultimately be less costly as the costs of life insurance go up over time.

If you are looking to have cheap life insurance coverage in place that will help you get through a particular period in your life – such as while your children are still dependent upon you – term life insurance may be right for you. Otherwise, permanent insurance may be a better option.


Compare Whole Life to Term Life

Choosing a life insurance policy can be a frustrating task, but it doesn't have to be. To best compare life insurance you need to understand a few key terms. First, when you are investigating a policy, you should know what type of policy it is. Life insurance is separated into two distinct categories: term and permanent.

Term Insurance, usually the least expensive form of life insurance, is selected for set number of years. Within the life of the policy, if you pass away, the death benefit you have selected will be paid to the beneficiary or beneficiaries of the policy. At the end of your term you will have the option to renew your policy. In the event that you do not renew your policy or you discontinue making the premium payments the coverage will end and no payment will be received.

At Advantage One we offer the newly introduced Return of Premium term insurance. This type of policy is for the person who thinks, "I'm not going to die before my term expires." In this case, if a policyholder holds onto his or her policy for the duration of the term, then the policyholder gets back all of the premiums paid into the policy at the end of the term period.

The other type of life insurance is a permanent policy. A permanent policy is exactly that, permanent, meaning that you will be covered for the rest of your life. At Advantage One we offer two different types of permanent life insurance: Whole Life and Universal Life. To best compare these flavors of permanent policies you have to know a little bit about each type.

Whole life guarantees death benefits and premiums are fixed for the life of the policy which makes it a very stable policy, but the downside to this type of plan is that it is inflexible and the potential rate of return is not very competitive. Universal life's goal is to eliminate the flexibility problems associated with Whole life by allowing for flexible premium payments along with the potential for an increase in the internal rate of return on the policy. Universal Life insurance revolves around a cash account, which acts like your own bank account but for insurance. As premiums are paid and interest is earned the account increases while mortality and administrative costs decrease the value.

Now that you know a little bit about the different types of life insurance policies available you will hopefully be able to weigh your options more efficiently to choose the plan that fits your needs.