Advice on Choosing Whole Life Insurance Plan
Part of family planning is planning for you or your spouse's death in order to ensure that your family’s standard of living will be maintained after you depart. However, many people struggle on whether to choose whole life over term life while selecting a policy. It is often helpful to understand the different types of plans offered so that you can make an informed decision during family planning and care.
Whole Life Insurance
This type of plan acts both as an insurance policy and an investment vehicle. The insurer pays a fixed annualdividend on a tax deferred account that goes towards paying your beneficiaries in the unfortunate event of your death. If you or your beneficiaries don't notify a claim, the money you have paid against the policy accrues into a cash value that can be drawn out or borrowed against. There are three types of whole life insurance: universal, variable, and variable universal.
This is the most basic whole life insurance policy. With this tool, the purchaser pays into a guaranteed death benefit to be used by the beneficiary in the event of the purchaser’s death. Some of the premium or payment goes into a safe investment.
This type of policy is for that high risk appetite, because most of the premium goes into the insurance company’s investment fund. This means that the death benefit is dependent upon the investment fund returns at the time of death. When choosing this type, monitor the reliability of claims paid out to others insured under a certain investment portfolio of that Company.
This policy offers the best of both worlds. It includes the guaranteed death benefit like the universal policy, and the remainder of the benefit goes towards an investment to be used as the purchaser sees fit.
Whole Life Insurance vs Term Life Insurance
The main difference between term and whole life is the amount of time each covers the insured. Term life covers a set term outlined in the plan, while whole life covers the insured person until death. And while whole life insurance offers benefits to the living insured, term life only offers benefits to the beneficiary upon the insured's death. However, the cost of whole life is significantly higher than term insurance.
Whole life offers many other advantages to the insured such as cash accumulation, use of whole life insurance cash, consistent payments, no taxes, and a larger growth potential. The idea behind term insurance is to buy term and invest the rest in mutual funds over the course of the term. According to experts, parents should buy cheap term life insurance for immediate coverage and wait until there is enough built up in whole insurance to cancel the term insurance. This way, term insurance covers your family in the case of emergencies, and whole life insurance can help protect your family in the long run.
Finding the right insurance is simple. You can compare rates online to find the right kind of insurance. Plans include whole life insurance, term life insurance, and more from the top companies. You can even find the right quotes based on what the average person pays in your region or state, so that your family is always prepared.