Life Insurance – A Beginner’s Guide
Whole Life Insurance and Term Life Insurance are the two basic types of Life Insurance to choose from and both offer the consumer a good degree of cover.
Term Life Insurance is the most popular option simply because it is the cheaper policy of the two. It is a policy that lasts for a specified period or term - perhaps 25 years. In this example payments are made for 25 years and ensure that financial cover is given to your named beneficiaries should you die whilst the policy is running. At the end of the 25 years the policy will end and so will the cover.
In general term life insurance policies are taken out to ensure that, in the event of death the likes of mortgage payments, schooling fees and the general provision for young families are covered. They tend to be taken out over a term that ends around the retirement age when the mortgage has been paid for and families have left home. In brief term life insurance is active when cover could be needed and ends when it is not.
In comparison Whole Life Insurance gives cover from the day the policy is taken out to the day that you die. Term life insurance cover ends when the policy ends but whole life insurance guarantees cover for as long as the premiums are being paid.
Budget is often a deciding factor when taking out a life insurance policy and term life insurance is the cheaper of the two. This is because there may never be the need for a payout; the insurance provider can keep the cost low, as the likelihood that you will survive the duration of the policy is very high. On the other hand, there is likely to be a payout at some point of the whole life insurance policy and therefore this policy is more expensive.
Choosing which policy to take out is your own personal decision depending on your financial capability and also the financial circumstances and needs of your beneficiaries but needless to say having some form of life insurance is very important. We want to have the peace of mind that our loved ones are catered for financially when we are not there to help them ourselves.