Making the Switch from Term to Whole Life Insurance
December 14, 2009 |
Featured, Term Life, Whole Life
Whole life insurance, just like term life insurance, pays out following the insured’s death. However, these two kinds of insurance are quite different in several ways. Term life is usually a lot less expensive because the protection is temporary. On the other hand, whole life has higher premiums but also provides protection over your entire life. Because whole life is more expensive, shouldn’t you just buy term policies in a series rather than purchasing whole life insurance?
Actually, the answer is no. If you are planning to stay insured for the rest of your life, then a whole life policy is a better investment. There are several reasons for this.
* Whole Life Insurance Covers You For Your Entire Life
Whole life’s biggest advantage is one policy covers you for life provided that you make all your premium payments. You don’t ever have to renew your policy. Also, although you pay extra money for whole life insurance than you do for term life insurance, the cost of your premium stays the same over your lifetime, making it easier to budget for the expense during your lifetime.
However, if you decide to purchase a series of policies for term life insurance, the premium costs will keep increasing each time you renew or buy new policies because of your age increasing and potentially your health getting poorer.
* Whole Life Insurance Carries A Cash Value
Another important advantage to whole life insurance is that there is a cash value component to it. You are able to access this cash value whenever you want or need to. You won’t have to qualify for it, and the interest rate will most likely be lower than it would be on a regular loan.
* Dividends
Whole life policies have an investment component. Part of your premium cost goes toward the payout on a claim and the rest of the payment is invested. Some of these policies pay out investment dividends to their customers, depending on what the insurance company’s profits are for the fiscal year.
* Cessation of Premium Payment
Some whole life policies have an added benefit of premium payments stopping once you are a certain age. As long as you have made all your premium payments, these types of policies continue to provide you with coverage without you needing to pay any more premiums. This is a very good option for retirees whose incomes may be reduced after they retire.
* There Are Some Important Uses For Term Life Insurance
Of course this doesn’t mean that term life insurance is useless. You just need to know which type of insurance is most appropriate and beneficial for your particular situation and status in life. Usually term life insurance is more suited for covering temporary types of situations. Young newlyweds, for example, who aren’t planning to have children for several years may be able to get low cost protection on a temporary basis and then still be able to switch over to fairly inexpensive whole life insurance while they’re still young.
Tags:
