While the differences between term life insurance and whole life insurance are pretty simple, it boils down to your needs and budget.
First, Term Life Insurance is purely for death benefits and is relatively inexpensive. The policies have a specified time such as 15, 20, 25 or 30 years; however, there have been some that are only for a year. The amount of the premium stay the same through the life of the policy. If the insured survives the policy and they want to remain covered, they must requalify, which could cause the premiums to increase.
Whole Life Insurance is simple, but can be expensive, depending on your wants and needs. The premium costs will also remain the same throughout the life. If you purchase a Whole Life Insurance policy when you are young, the premium will stay the same regardless of issues associated with aging or any health issues. The big advantage is that there is a guaranteed rate of return on the cash value. The value is allowed to grow on a tax-deferred basis and you won’t be taxed unless funds are withdrawn. Some policies will pay dividends to the policy holders depending upon the success of the investments.
Within Term Life Insurance and Whole Life Insurance, there are several different policies.
Term Life Insurance Types
Guaranteed Level Term Life Insurance
The amount of death benefit protection, or payout to the beneficiaries, will stay “level” throughout the term of the policy. The premiums may stay the same for the life of the policy, remain the same only for a certain amount of time, or may increase. If you select this type of policy, be sure you know the parameters of the requirements.
Annual Renewable Term Life Insurance
While your death benefits will stay the same for the period of the policy, the premiums won’t. They will increase each year.
Return of Premium Term Life Insurance
With this type of policy, it allows the beneficiary to extend the coverage term without having to requalify. Of course, the insurer will look at several things such as whether or not the premium payments are up-to-date.
Decreasing Term Life Insurance
This policy can be used as a rider on another policy. Basically the death benefits go down and the premiums stay the same as the term goes on. A good reason to purchase this would be for mortgage protection. As the mortgage amount goes down, so does the death benefit.
Whole Life Insurance Types
Guaranteed Universal Life Insurance
This is a more flexible policy where the policyholder may determine how much of the premium dollars go toward the death benefit and how much goes to the policy’s cash value.
Variable Universal Life Insurance
This policy is similar to the Guaranteed Universal life insurance; however, the policyholder may invest the cash in their policy into different investments such as mutual funds. With this policy, there is no guaranteed minimum case value.
Final Expense Life Insurance
This is obviously for funeral and burial expenses and is usually purchased by people aged 50-85, although some insurers will sell them to people older. These policies are usually not expensive.
As you can tell, there are insurance policies for nearly every situation. If you are having difficulty, call our office and we’ll be happy to explain and answer any questions you may have!
At Ron L. Reed and Associates, our mission is simple, “To be Clear, Concise and Conversational with our potential and current clients. Our values are People Respect, Opportunity, Passion, Excellence and Loyalty.” Give us a call or get an instant life insurance quote by filling out the form to the right.