What Types of Life Coverage Are There?
Most life policies fall into one of two categories. They’re either term life policies or whole life policies. While both types of policies provide death benefits, their structures are significantly different.
Term life policies are structured to provide coverage for a set number of years, or a term. Most terms are between 10 and 30 years. During a policy’s term, the policyholder must pay premiums in order to receive coverage. After a policy’s term, coverage ceases -- but so do premiums. In general, term premiums are fairly low and remain low throughout the duration of a policy’s term.
Whole life policies are normally designed to provide life coverage for the remainder of a policyholder’s life, however long that may be. They generally don’t have a date on which benefits expire. Whole life policies’ premiums also don’t cease on a specific date, but the policies have another means of dealing with premiums.
Most whole life policies’ actually increase over time, and the payments can become high later in life. These policies, however, also have investment vehicles built into them that usually increase in value over time. As the investments inside a policy grow, the interest they generate can be used to pay the policy’s premiums. In many cases, the interest generated by investments eventually exceeds a policy's premiums -- essentially making a policy free even though there are still premiums to be paid.
Are Term or Whole Life Policies Better?
Term and whole life insurance policies both have their uses. Neither is truly better than the other, but they each should be used in different scenarios.
Term life policies are generally a good investment for people who simply want to make sure their family will be taken care of if they pass away unexpectedly during their working years. The lower premiums are affordable even when raising a family, and policyholders can stop paying the premiums when their policy’s term is up. By this time, hopefully, any children a policyholder has will be financially independent, and they and their spouse will have enough savings in another account to provide throughout retirement.
Whole life policies are useful for people who want to save up for retirement within their policy. People who like the convenience that these policies offer and are comfortable with the investment choices they provide might not need to invest through another account.
Whole life policies are also wise choices for people who need to ensure a handicapped or disabled loved one will be cared for after their passing. Because these policies usually never expire, policyholders can make sure a loved one who needs extra help will have the financial resources to pay for the assistance they need no matter when a policyholder passes away.
How Can People Get Quotes for Life Insurance?
People who would like help deciding whether to get term or whole life insurance, and requesting quotes, should contact an independent insurance agent who serves their area. An independent agent can explain the benefits of each type of policy, and they can quickly request quotes for either form of life coverage from multiple insurance providers.