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Life insurance is an important thing to have, and one that can provide you with much peace of mind. You can feel more relaxed about the future if you know that your loved ones will be protected in case anything happens to you. But, you might not know where to begin shopping for a life insurance policy. In fact, you might not know anything about life insurance at all. The basics come down to this: there are two types of life insurance, whole and term, the difference between the two being that term policies are only for life coverage.
Whole life insurance has the advantage of lacking an expiration date, so long as you keep up with your payments. So the name of it is fairly descriptive, it applies for your ‘whole life.’ (Or until you reach 100 years old.) This type of insurance policy increases in monetary worth over time.
With this kind of insurance you’ll be paying an unchanging amount of money over your life, rather than increasing payments as would occur with term life policies. Furthermore, the value on whole life insurance is a guarantee, rather than the gamble that term insurance is. In both sorts of policies, however, you do have to pay the full premium, or your insurance will expire.
Whole life insurance is a good option to consider for individual long range financial planning. Whole life insurance brings security of permanent lifetime insurance protection coupled with the ability to cancel or surrender the policy at any time for cash. In addition, there are tax advantages to whole life insurance allowing policyholders to save money overtime on a tax deferred basis.
Whole life insurance policies can be a good investment vehicle. Supporters even argue the cash value should compete with other fixed income investments. A policyholder can end up with a higher cash value than the guaranteed amount (variable policies do not carry guaranteed cash values) if the market performs well or the interest credit rating of the insurer strengthens. Policyholder’s also have the right to borrow against the cash value of the whole life insurance policy enhancing one’s credit profile.
The last attractive basic feature of whole life insurance one should consider, arguably the most valuable, is the opportunity to earn dividends. The dividends are set based on the overall return on its investments for the insurance company. While universal life insurance is often adjusted monthly, interest on whole life policy is adjusted annually.
Whole life insurance is more expensive than term life insurance because it is offering coverage for a life-time with attractive features such as flat premiums and guaranteed cash values. Purchasing whole life insurance should be carefully considered and you should be sure you can afford it over time. If you decide you cannot afford coverage, at least buy term life insurance.
Susan Reynolds is the webmaster for a leading South African Life Insurance provider. For more information visit: http://life.insurance123.co.za/
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