Life insurance has several intricacies, which it is essential to understand before making the critical decision to take out some form of life insurance.
For the layman, it is sometimes quite confusing. For example, critical definitions are essential to make solid decisions around your life insurance strategy.
Let’s lay the foundation by taking a look at some crucial definitions.
Whole Life And Term Life Insurance – What Are The Differences
Term life insurance is the equivalent of renting a car, whereas whole life insurance is equated to owning a car.
Term life insurance will give you the life cover while paying premiums for a limited period. While you are paying premiums, you get the benefit of being covered. Once the period is over, there is no longer any cover. While you rent the car, you have the use of the vehicle, but once the rental period is up, you no longer enjoy the benefit under the rental agreement,
Whole life insurance equates to owning the car – you own it for good until you die. In addition, you have a cash value benefit with whole life insurance, something which you don’t get with term life insurance.
Key takeaways for the difference in benefits include the following:
- Whole life insurance policies increase in value, whereas term life policies do not.
- Term life insurance expires, whereas whole life insurance stays in place for the insured’s entire life.
- Whole life insurance is more expensive than term life insurance.
Let’s look closer at whole life insurance now that we understand the differences.
Critical Aspects Of Whole Life Insurance
Whole life insurance means what it says. Once you take out whole life insurance, you are covered as long as you pay your premiums and are alive. At the time of your death, the beneficiaries will receive a payout.
The policy and premiums remain the same and do not change.
There are two essential aspects to whole life insurance. Firstly, there is a guaranteed payout to the beneficiaries, and secondly, the policy’s cash value grows over time and can be accessed while alive.
Whole life is almost the same as getting a life insurance policy and retirement planning asset in one.
Cost Of Whole Life Insurance
It is challenging to accurately advise the costs of a general type of insurance, be it whole life or otherwise. This is because many factors affect the prices. For example, the amount of the death benefit, the insured’s age, and the insured’s health when taking out the policy.
As such, the question of costs is akin to asking how long is a piece of string. However, this is not helpful.
It is possible to compare whole life insurance rates by age.
Note that these are generalized figures. The only way to get an accurate quote is to see your insurance broker, who will advise you what needs to be done (such as medical examinations). Then, you will be provided with an accurate quote based on your specific circumstances.
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