Whole Life Insurance & Term Life Insurance-Which Should You Choose?

March 11, 2009 by  
Filed under Life Insurance

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Before you venture out shopping for life insurance, you must be aware of the two fundamental types: Whole life insurance and Term life insurance. What is whole life insurance? Whole life insurance is a policy that lasts for the duration of your life, meaning that your dependents are assured to be given a stipulated amount at whatever time of your death.

What is Term life insurance? Term life insurance is usually purchased identically as a mortgage, and generally includes the same 25-year period. It is a simple assurance with no aspect of investment that protects your beneficiaries through payment of a lump sum in case of your death within a specific time period as agreed upon in the life insurance policy.

After knowing the basic knowledge of these types, you will now make a decision and choose what type of life insurance suits you best – term life insurance or whole life insurance.

Here are some tips regarding Term life insurance that you need to know to make your decision easier: a.) Know your Premium budget. If your premium budget is small, term life insurance is better since the life insurance rates covered are lower. b) If you need a larger amount of cover, say, you have beneficiaries, then taking advantage of the lower premium levels will be better for you. c) Premium terms, life insurance quotes are lower if you are young. You might be able to arrange a term life insurance for the whole time you’ll need life insurance especially when you have dependent children or beneficiaries. d) Term life insurance does not need an investment, so if you invest in the stock market or invest in other type of savings, you won’t need for a life insurance policy having an investment component.

Next, here are some tips regarding whole life insurance that might be useful for you: a) If you think or feel that you will need cover for more than a specified period of time, then whole life insurance is the better choice since you will be assured of payment during the whole of your lifetime. This also prevents you from being unable to get insurance due to a fact that it happened over the time duration of the policy. b) If you want to have both your insurance and a certain amount of your investment within the same policy, then whole life insurance suits this option best.

At the time when the life insurance policy has accumulated up an investment amount over in later years, you will be able to borrow against its value thus you will have the advantage of benefitting from the policy without having to die. At a general note, you should also take note if you have a mortgage on your home, if you have one then it is advisable to make use or arrange of a “decreasing term” life insurance policy to at least pay the mortgage at the event of your death.

The type of life insurance you choose is dependent on your own personal circumstances and priorities. It depends mostly on your premium budgets to determine the monthly life insurance rates, thus you will have to consider the amount of life insurance that you could buy to provide your family or beneficiaries with an income that is more or less equivalent to your earnings. So take your time and think about what you need before venturing out to shop for the right type of life insurance for you and your family.