Term Life Insurance (vs. Whole Life)
One of the most popular types of life insurance is known as term life insurance or term assurance. Consumers are attracted to term life insurance policies for many reasons, and over the past couple of years this type of coverage has become even more popular. If you are interested in buying life insurance coverage, checking out the details of a term policy may be the best place for you to start your search. We can help. Our experienced consultants are here to answer any questions you might have.
DEFINE TERM INSURANCE: Term life insurance provides coverage for a limited period of time. For instance, a 10 year term life insurance would cover you for 10 years, not a day longer. This is different than a whole life policy which covers you for your entire life.
Once a term life insurance policy expires you can either drop it or purchase additional coverage. Keep in mind that adding more coverage may cost more money as your circumstances have changed and you are now older.
Term life insurance is one of the most cost effective policies available. With the average life expectancy increasing the cost of term life is on its way down. As a consumer you may not like the fact that term life insurance can expire, but it is hard to argue with the low cost of coverage.
With term life insurance consumers have options including the length and amount of coverage; this is similar to all types of policies.
|My life insurance broker was very helpful - he showed me all the available policies and helped lower my term life premiums and increase my benefits.
T. Larson, Indiatlantic, FL
WHOLE LIFE COMPARISON:: Term life policies offer death benefits only, so if you die you win (so to speak). If you live past the length of the policy, you (or, more specifically, your family members) get no money back.
Permanent life policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.
As you might expect, permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, because more money has been paid in and the cash value has earned interest, dividends or both.
The debate is all about that cash value. If you buy a policy today, your first annual premium is likely to be much higher for a permanent life policy than for term.
However, the premiums for permanent life stay the same over the years, while the premiums for term life increase. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax-deferred if the policy is cashed in during your life. (If you die, the proceeds are usually tax-free to your beneficiary.)