When buying life insurance its vital you get the right policy for your needs. With a plethora of web sites offering discount life insurance, it’s often easy to end up with a policy that is not suited to your unique needs and circumstances.
There are a variety of life insurance policies available, so it’s important to understand the differences.
Term Life Insurance Benefits:
With term life insurance you pay for a predefined term, and are covered for that term (normally the same term as your mortgage).
Term life insurance only offers protection for the duration of the mortgage, and can be of little value when once your mortgage is paid up.
Term insurance is also cheap, and can even become cheaper over time. There are also a number of different types of term life insurance to choose from as follows:
* The first is known as level term cover, and it’s the most common type. With this form of policy the premium costs are locked in for as long as you hold the policy. In other words, you will pay the same amount throughout the entire term of the policy.Unfortunately, it means that as time goes by you could end up paying more for your life cover. However, the nice thing is that you get the benefit of paying at today’s rates. However, bear in mind that over time these rates could fall instead of rise.
* The next form of term life insurance is escalating term cover. This policy can be more expensive, as you pay an increasing amount each year. However, the lump sum payable at death also increases. These are normally low cost policies, and are best suited to younger people.
* The third type is known as decreasing term insurance. In this case your monthly payments will stay the same, although the amount of cover you receive will reduce each year.
* The forth type of term life insurance is what’s known as increasing term insurance. Here the lump sum payable at death increases each year. This increase in value of the policy is made up by increasing the premiums periodically over the years.
* The fifth and final type of term life insurance is known as convertible term insurance. This type of term life policy provides a way for you to convert your policy into an investment/insurance policy in the future. With this type of policy the price of your future investment policy is based on your health when you bought the cheaper term insurance.
Whole of Life Insurance Policies:
A whole of life policy can be more complicated and more expensive than term life insurance. However, a whole of life insurance policy covers you up until the time of your death, providing that you keep paying your premiums!. The advantage of these types of policy is that your family could receive a considerable lump sum when you die.
Whole of life policies can be more expensive and more complicated than term life insurance. Also, the investment you make can earn some interest each year. Therefore, since your investment generally grows each year, your premiums can actually reduce over time. You may also reach a time where the interest gained covers all the future premiums, which means you may have no more premiums to pay.
However, it’s important to understand that the final cash-in-value of a whole of life policy may or may not equal the amount of money that has been paid into the policy over it’s full term.
Summary:
The decision of whether to buy a term life policy, or whole of life cover comes down to your own unique needs, and circumstances, and what you wish to achieve.
The simplest form is a level term policy with a renewable option. This will allow you to get life insurance for as long as you may need it.
However, you may prefer a policy that offers a growing nest egg, that pays out while you are still around to enjoy it!
Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.
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