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Whole Life Insurance Versus Term Life Insurance

Mar 29, 2008
Here follows a basic outlay of why a whole life insurance policy could be the best choice when it comes to choosing life cover for you and your family. Just to make sure you know how life insurance works, I would like to give you some basics that coincide with both whole life insurance and term life insurance.

Ideally you would know that you can request a life cover comparison chart from a life insurance coverage lawyer or broker. Using this chart you should be able to compare term life insurance rates versus whole life insurance rates. When you compare life insurance you will be choosing the best life insurance policy according to the benefits and the affordability or the amount you would like to invest in securing financial security in the event of your death.

Then sign the dotted line... and if you pay your premiums month after month (or year after year if that was as option you chose) you should be covered for death under normal circumstances excluding certain provisions that differ from life insurance policy to life insurance policy.

Certain provisions are made towards exclusion if the cause of death is such as suicide or even HIV/AIDS. That is something you have to make sure before you sign.

If for instance that you die a natural death, the beneficiaries of your life insurance policy will be entitled to a lump sum cash payout or monthly cash payout or even a combination of both. Payout options differ from policy to policy.

Now that you know the basics, please take note that the best life insurance option will be the one that is the best option for you depending on you being able to make an informed decision. Furthermore, let me inform you on the basic two types of life insurance: Whole life insurance and term life insurance.

Whole life, or Whole term or permanent life as it is sometimes called, is a binding contract between you and the life insurance company that usually ends by either one or two defaults: either through the death of the insured or by the insured handing a written request to cancel to the life insurance company.

Term Life insurance operates in the same manner except that the term of life cover is fixed for a certain period, normally from just a few years to thirty or more. With the term life option you get third option of cancellation that takes in effect automatically after the period of cover specified in the term life insurance policy expired. The only alternative to this option is where the insured request his/her life policy to be extended. Such extension is called a renewal of life insurance.

At such time of renewal of the policy, the insured can opt for a different type of cover. Based on the changed circumstances he/she now may be able to afford more term life cover or chose to invest in whole life cover for the same amount death benefit but with an accumulating cash value portion. Because this option increases the premium and because the investment portion may not necessarily show the same growth percentage, some people tend to dismiss whole life insurance as too expensive and a way by which the insured are liable to pay for unnecessary expenses to the life insurance policy.

Yes, there are some life insurance companies that does underwrite or brokers that get away by letting people sign without calculating the effect of the premiums versus the needs of the insured. This affordability study is crucial as the amount of money insured for can be looking like an ideal answer as a means to provide a comfortable life for the family of the insured in case of death and more than often it gloom of the riches, even though it is only for the benefit of others, can overshadow the financial situation and the probability that the insured can choose benefits of which the premiums will be putting strain on his/her cash flow.

To conclude - make sure you know all the facts and if the whole process seems too hurried, do not sign yet. Chances are very slim that you will die that very same day. Normally, that is.

The broker can play on your feelings to sign right away and although it is true that you can be hit by a bus on your way out, chances are much bigger that when you have signed in a hurry, you might have done so without properly checking out the affordability of your decision.

If affordability is a definitive issue, I suggest looking really hard at the option of a term life insurance policy. Otherwise, if you decided on a death benefit that is high enough to sustain a comfortable life for your family in the event of the life cover paying out earlier than you asked for, whole life insurance is definitely the option to consider.

Although you might be able to upgrade to a whole term policy later on, the best is to look at the guaranteed growth of the investment portion. Considering that saving is a fashion that is about to become unheard of as credit is the creed of the young, I suggest that if you can afford to invest, that you would look at the guaranteed growth of the life insurance cash value as promised by the insurer, and consider the benefit of the saving against the growth potential of other investment option.

The best decision you can make is the one that would provide you with enough cash in hand to enjoy life while you are still alive. No chance spending any of your hard earned cash afterwards!
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