If you have a family, you need life insurance. Companies offer two main types of coverage: term and whole life. Term life insurance covers you for a specific term, or length of time, charging a specific premium amount. Whole life insurance is viewed also as an investment vehicle, with some of the premium payments returned as part of a benefit payout. Whole life insurance is more expensive than term life insurance.
What Is Term Life Insurance? There are hundreds of varieties of life insurance, and prospective buyers must consider many factors. Term life gives the buyer coverage for a specific number of years, usually up to 30. The insurance value and rate of premium payments remain fixed during those years.
Whole life insurance premiums must be paid throughout the client’s life. The policy usually combines insurance coverage with tax-deferred investments. If the policyholder lives for many years, the original value and ultimate payments are more than they would have been with term life insurance, fixed-value coverage.
Advantages Of Term Life Insurance: Term is the cheapest life insurance, with the full amount paid to beneficiaries if the insured person dies during the years of the contract. It’s convenient for those in their early working careers. The moderate premiums can fit into budgets, particularly when submitted as automatic withdrawals from salaries or bank accounts.
In event of the policyholder’s death, the surviving family members receive the full face value of the contract. This is usually when they’re in most financial need.
Disadvantages Of Term Life Insurance: There’s no investment factor in the term life insurance policy, so the value never increases. The coverage in effect ends when the contract expires. For example, with a 20-year term policy, if the insured person dies a year after premium payments end, there’s no money for beneficiaries.
Premium Payment Examples: Whole life premium charges are considerably higher than those for term insurance. For example, a $500,000 whole life policy may cost $1,000 a month, with the possibility of increasing in later years. Term life with the same face value for 20 years may cost as little as $25 a month, and the premium payments never increase.
Considering Term Life Insurance: It’s essential for a young career person with family responsibilities to provide for them in case the insured wage earner dies early. Term life insurance is the most effective and inexpensive way to accomplish it.
In his career, Ted Sherman was associated with Prudential Financial, Inc., one of the world’s most prestigious insurance companies. For 25 years, he was advertising and sales promotion manager for the company’s Eastern region. He created insurance information for Prudential sales agents and consumers.
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