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When you buy life insurance its vital you get the right policy for your needs. With a plethora of web sites offering discount life insurance, it’s often easy to end up with a policy that is not suited to your unique needs and circumstances.
One of the questions that arise time and again is whether a term life policy or a whole of life policy is best, and what’s the difference between them.
Term Life Insurance Cover
Term life insurance is a bit like leasing a car. You pay cover for a predefined term, and are covered for that term. However, at the end of the term, whether for example its 15 years or 30 years the deal is done and you simply walk away. This means that term life insurance only offers protection for the duration of the mortgage, and is usually of little value once your mortgage is fully paid off.
Term insurance is generally cheap and is expected to fall over time providing you don’t suffer from a major disease. However, there are a number of different types of term life insurance policy.
Whole of Life Insurance Policies
Whole of life cover covers you right up until your death. Provided, of course, that you keep paying your premiums! It can pay out a substantial benefit to your loved ones when you die, and it can also accumulate a cash value over time.
This type of policy is more expensive and complicated than term life policies. The investment you make earns some interest each year. So, providing your investment grows, your annual premiums can actually reduce over time. Also, there may come a time when the interest produced can cover all your future premiums, and as a result you may have no more premiums to pay on your policy.
However, it’s important to understand that the final cash-in-value of a whole of life policy may or may not equal the amount of money that has been paid into the policy over it’s full term.
When it comes to the decision of whether to choose a term life policy, or whole of life insurance cover, the ultimate decision must be guided by your individual needs.
The simplest form is a level term policy with a renewable option. This will allow you to get life insurance for as long as you may need it.
However, you may prefer a policy that offers a growing nest egg, that pays out while you are still around to enjoy it! Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.
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