Whole Life Insurance And Term Life Insurance
There are a lot of people who cannot differentiate between Whole life insurance and Term insurance. This leads to them being unable to decide which is the right one for them and why should they buy it. While one cannot advise people on which they should buy one can give them the pros and cons between the two so they can make an informed decision.
As the name suggests whole life insurance is insurance cover for life and this holds good so long as your policy hold a good standing. The insurance is valid for death or till you attain the age of 100 whichever comes first. One of the advantages of a whole life insurance is that you have an inbuilt savings plan going on. This is all worked out by the fact that a part of the premium is used to buy the life insurance and the rest gets put in to an interest accumulating savings account. In case of emergencies like an illness or breakdowns of some kind, your Ac or your car for example, you can borrow against this account but it must be repaid. But the disadvantages of whole life insurance are that this is not a cheap policy as the premium payments are much higher than a Term life policy. Secondly as you age the savings account does not accumulate as much so while a whole life policy makes a lot of sense for a young couple, it really does not help an older person or persons. Then Term would definitely be a better option to opt for.
Term life insurance is just that, for a term, a fixed time period or tenure and this has three variants viz; a “guaranteed term”, a “20 year” Term and a “recurring term” which is self explanatory. With a Term life insurance you are buying only a Term life insurance so it is a pure life insurance. Here there is no savings account involved so there is no question of accumulating or borrowing against it so you pay only for the insurance, secondly some Term life insurance types can be rolled over like the guaranteed term. You could surf the net for more information on this.
Term polices are for a specified duration only and at times, circumstances permitting this can be used to one’s advantage. To illustrate this point take the case of a fictional middle-aged householder whose kids are still at college and payments are being made on regular basis on some major asset. Here a Term insurance of ten or even twenty years would give them some security in case of any mishap or calamity and the family could continue living without having to deal with issues barring the loss of a loved one.
All this information confirms that it is difficult to give people advice on which insurance they should buy without knowing their financial situation but the differences between the two should give an idea of what you could look for and what will suit you the best.