How To Choose Between Term And Whole Life Insurance Policies

                                                                                         

Term and whole life insurance policies are the two different types of life insurance you should be familiar with, if you wish to get a life insurance. There has been a long as which policy is preferable. It is true that both types of life insurance policies have benefited people. Like others, you may also get confused about which one to take. However, if you understand the merits and demerits of the both types of life insurance policy, it will be easier to make a choice. Here follows a comparative study on the term and whole life insurance policies.

Term Life Insurance

Term life insurance is known as the most basic or pure insurance. When you purchase a term insurance policy, it will cover life only. According to this policy if you die, the insurance company will pay the amount of the value of the policy to your beneficiaries. This type of policy is available for a particular period of time such as 1 year, 5 years, 10 years, 15 years, and so on. Once you have bought the policy it will remain in force until the end of the term mentioned in your policy. A term life insurance is renewable at the end of a term. The death benefits will remain same, but the premium will gradually increase with your getting older.

Whole Life Insurance

Whole life insurance is also known as the "permanent" or "straight" life insurance. This type of policy combines a term life insurance policy along with an investment. What makes the policy attractive to many is that the policy not only provides financial protection for beneficiaries but also simultaneously generates a cash value. So , as time will go on, your whole life policy will also build cash value. Moreover, if you want you can borrow against that cash value at a later time. Thus, the policy creates a savings of sorts, and you can think of a portion of your premium as setting aside money for later use in life.

The premiums

There is a huge difference between the term and whole life insurance policies regarding the premiums. The premiums for the former are relatively lower than those for whole life policies. If your health is in good condition and your age does not exceed 50, term life insurance can be relatively inexpensive. But the premiums for the term insurance greatly vary. The premiums are lower when you are younger in age and with your getting older the premiums will also increase.

In contrast, the premiums of whole life insurance policies can be quite high. But it has a fixed level premium, which never increases for as long as you own the policy. A portion of your premiums will go to pay for the death benefit and the rest will be applied to cash values. During the early years of your policy, the premium will also be applied to administrative costs.

Thus, if you want to purchase a life insurance policy, you should consider the benefits of the both types of life insurance. Moreover, taking a life insurance will wholly depend on your financial condition as well as your needs and desires.

About the author:
Greath Owen writes about life cover.To know more about life assurance, please visit http://www.lowcostlifeinsurance.co.uk/

Article Source: http://www.Free-Articles-Zone.com