A life insurance policy provides a degree of security and assurance to your loved ones should something bad happens to you. There are several types of life insurance policies that you can obtain in order to have peace of mind, security, and assurance for you and your loved ones.
Generally, we can group life insurance into two main types: term life insurance and whole life insurance. But, do you actually know the difference between these two? This article gives a rough idea on basic differences between a term life insurance and a whole life insurance. Let’s explore in detail.
The Basics Of A Life Insurance Policy
A death in the family is a heartbreaking affair, more so towards the family of the deceased. What if the deceased is the breadwinner of the family? The loss of someone whom others depend on will have a tremendous toll on the future financial security of the deceased’s family and dependents. Who will pay for daily expenses, house mortgage, and children’s education?
A life insurance will ensure that these concerns are taken off. Regardless of how a person dies, a life insurance guarantees the family and dependents with a modicum of financial security, including replacing lost income, covering for basic living expenses, paying off household debts, funding a child’s further education, and supplementing retirement savings, among others.
Death comes regardless of age or state of health, therefore it is prudent if one obtains life insurance protection as a sure policy and assurance to one’s family or dependents. There are two main life insurance policies that one may purchase, which is term life insurance and whole life insurance. Let’s explore each and gauge which is the best for the individual to partake.
What is Term Life Insurance?
A term life insurance is basically a life insurance policy whereby you pay premiums for a certain period, say 20 years or 30 years, and in return, the insurer will cover the said period and will pay your beneficiaries an agreed or set amount or benefit if you pass away during the time.
It is one of the most affordable life insurance, and generally, the policies are easy to understand so that you do not have to worry about hidden fees, exclusions, or risks. Should you keep your insurance premium payments current and up to date, your beneficiary will receive the full amount of the insurance payout if you die unexpectedly within the policy period. Furthermore, you can cancel the term policy at any time before the policy expires.
What are the potential downsides to term life policy? When your policy expires (say you have completed payments until your 20th year in which you are covered), your coverage also expires. Should you wish to continue or extend your term life insurance, it is akin to purchasing a new life insurance policy, or you might consider taking up a whole or permanent life insurance option.
This is slightly detrimental as usually, the cost of insurance premiums increase as you become olde. You may not qualify for an extended coverage in the first place if you are potentially a less-healthy person. Also, if you outlive the term, your beneficiaries may never receive the benefit. In fact, that is how insurance companies keep the premium costs low because generally, they expect most people to outlive the term.
What is Whole Life Insurance?
In stark contrast to term life insurance whereby you are covered for a set amount of time, say 20 or 30 years, whole life insurance provides a death benefit throughout your life. In most cases it also includes a cash value component that accrues value over time, allowing you to withdraw funds as needed. The benefits are quite clear, that is you are covered for the rest of your life, not just a stated term, and as long as your insurance policy is in force while you pass away, your dependents or beneficiaries will receive the death benefit.
Your beneficiary is no longer restricted to a set term or period and will receive compensation even if you outlive yourself to over a hundred years old and your policy is still in effect. In addition, you may have access to your money invested in your insurance premiums, as a portion of the insurance premium becomes part of the policy’s cash value, and upon a certain time you may be able to withdraw these funds, thereby providing you and your family an additional source of income and financial security.
One of the drawbacks of whole life insurance is its higher initial premiums, whereby usually the insurance premium for a whole life insurance policy is significantly higher than a comparable term life policy. However, whole life insurance premiums will become affordable over time, whereas for term life insurance policies, you may need to be re-evaluated if you are eligible for continued protection after term life has expired, due to your age and health.
Also, buying a whole life insurance policy is a bit complex as compared to term life insurance, as there are numerous ways to customize your policy based on your specific goals or needs. And, usually, because of the high premiums, consumers might buy less coverage than they actually need.
Visit Our Website To Decide Which Life Insurance Suits You
Confused whether taking up a term life insurance or a whole life insurance? Do not worry, contact us at http://www.policystreet.com for the best life insurance offer! Currently, you can get the first online term life insurance in Malaysia on our platform, but should you require a whole life, tell us and we shall connect you to the right sources to obtain it. Rest assured that whichever insurance you decide, you will ensure your loved ones financial stability and will guarantee their future needs. Sign up for a life insurance via PolicyStreet today!
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