What Should You Choose between a Term Life and a Whole Life Insurance?
Wednesday, January 24, 2018, 6:00 PM | Leave Comment
Life insurance policies are designed to protect you and your loved ones against the unfortunate events of life.
However, most of the people don’t buy a plan as they find it difficult to choose a term and whole insurance plan.
Know about all the basic and optional benefits offered by both insurance policies and choose your insurance plan accordingly.
Life is so unpredictable these days and the unexpected can happen any moment. A cheap life insurance plan with suitable coverage proves very useful in such situations. But, most of us still hesitate to buy such a plan because they struggle hard while understanding the various insurance plans available.
The term and the whole life policies are among the most debated life insurance policies and most of the potential insurance buyer can’t decide which plan they should go with.
In this article, we are providing everything including the basic definition, coverage and additional benefits offered by term and the whole life policies.
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Term Life Insurance
Term life is the simplest form of life insurance and offers a low premium coverage to the insured.
These policies are offered for a limited period and can cover the insured for up to 30 years.
In the event of death when the policy is in effect, the insurer provides the beneficiary an accumulated death benefit that might be used to take care of existing mortgage, debts, funeral and other essential expenses.
For someone who is assured that their dependents will be able to take care their own expenses after a certain period and needs a short-term protection, term-life policies offer a great range of options to choose.
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Whole Life Insurance
Whole life insurance policies protect the insured and their loved ones as long as they live or the policy is in effect.
These policies are offered at a bit expensive premium than the term-life insurance but provide more coverage than the same.
In case any of the insureds die during the policy term, the insurer is entitled to provide a lump sum amount as the death benefit to the beneficiary to take care of financial debts, funeral expenses, pending medical expenses as well as other essential requirements.
Also, these policies provide an accumulated cash value that increases every year depending on the on-going interest rate and the policyholder doesn’t need to pay any taxes on the income received through the accumulated cash value.
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Comparing Both Plans
Next comes comparing both the policies for their validity, prices, coverage as well as other benefits. Here, we are providing a simple yet clear comparison of term and whole life insurance policies.
Let’s start with some basic differences between both the policies:
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Validity
Term life policies protect you for a limited period of time that can go up to 30 years while under a whole life policy, you and your loved ones are protected as long as they live or the premiums are paid.
Typically, term life plans cover you for a maximum of 30 years but there is the option to renew the policy if you want to extend the protection.
However, the premiums may go higher once you cross 50. Some insurance providers also give the option to convert your term life plan into a whole life plan and by choosing the same, you can be relaxed for the rest of your life.
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Benefits
Usually, a term life insurance plan provides a death benefit to the insured’s family in case they die during the policy term. But a whole life insurance plan not only helps with a lump sum death benefit but also the accumulated cash value built over the years.
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Accessibility
Term life policies are named among the simplest life insurance policies and you can easily qualify to get one.
As these plans offer a cover for a limited period, they are available at a comparatively cheaper premium.
Whole life policies aren’t that easy to get and in most of the cases, you are likely to undergo a medical examination to prove your insurability. You may also need to answer the questions related to your past health records and your premium amount may defer depending on your health status.
However, there are some whole life plans that provide an option to get your insurance without undergoing any medical condition.
Just by filling an online form, you can receive cheap life insurance quotes from the various insurance provider for your preferred insurance type.
Comparing the benefits and coverage offered, you can choose a suitable insurance plan providing maximum coverage for an affordable price.
These policies have a comparative expensive premium than the standard whole life policies but still are a good option for those who are suffering a serious illness and haven’t got any insurance plan to cover.
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Cash Value
Other than the death benefits, whole life policies provide an accumulated cash value to the insured, but it takes a long time to be built.
There are various factors that decide the cash value, mainly it’s determined on how much profit the company makes within a certain period.
Generally, it takes around 12 to 15 years to build a decent cash value but provides a unique withdrawal option.
You can withdraw a portion of the cash value even before the policy matures and invest the money in the stock market or execute your estate plans.
While a term life policy doesn’t offer any such additional perk and no cash value is built during the life of the policy.
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Longevity
Longevity is a major factor that you need to keep in your mind while buying a life insurance plan. As the name explains, such a policy is supposed to take care of you for life.
However, a term life policy doesn’t cover you for life. These policies can protect you for a maximum of 30 years and expire if you don’t choose to renew. That’s why these policies are known as temporary policies.
Even if you choose to renew a term life policy once it matures, you would have crossed the age of 50 and the premiums increase year by year and end up being unaffordable for you.
However, that’s not the case with a whole life policy. Once you buy a whole life plan, you get relaxed for the rest of your life. During the initial years, a whole life policy may seem a bit expensive but proves affordable after certain years.
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