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Trying to find the right life insurance policy for you can be very difficult. This is due mainly to the fact that you have to consider your personal circumstances and how they affect the choice of plan you ultimately go for. One person might need cover for the whole of their lives and someone else may only need cover for a set term. In this article I intend to point out the main differences between whole life assurance and term insurance and consequently which one might suit your particular circumstances.
The primary difference between term and whole life insurance is simple: term insurance offers only life coverage. A term policy does not build a cash value over time. When the person (or persons) covered by the term policy pass away, the death benefit of the policy is paid to a beneficiary.
As for whole of life cover, this works differently. Whole of life insurance is designed to provide a death benefit in the same way as term insurance. However whole of life insurance does this for the whole of the life of the person insured on the plan. It is for this reason it is known as whole of life and not term. Also, this type of plan will also build up a cash amount known as the fund. Making the choice as to which one is more suitable for your particular needs does need a lot more investigation, such as balancing what each plan offers against a persons own requirements.
It should be noted that whole of life insurance is generally more expensive that standard term, insurance. Owing to the fact that it will run for the life assured's whole life and the fact that the plan carries an investment element. In contrast term assurance which runs for a specified term and also has no investment element is proportionately cheaper.
Many people prefer term insurance because of the low premiums. They only need a simple policy that pays a death benefit if they pass away. Further, many believe that investing the amount of money saved through lower premiums, they can outperform any investment vehicle offered by a whole life policy.
Even though a lot of financial advisors would still rather recommend the whole of life insurance plans, they do appreciate that building up a fund value within the plan and the resulting higher premiums that task creates is not necessarily beneficial to all clients. This is due in no small part to the fact that most people have differing insurance requirements to that of others.
If a wealthy person is creating a complicated estate plan to shield various assets, there may be a need for a whole life policy that builds a cash value over time. Often, people who own and operate businesses need additional coverage to protect their families, their assets and themselves.
However if a parent just wants to protect their family in case they die level term insurance can be hard to beat with low premiums. When you factor the lower premiums versus those of the whole life insurance it does make it much more affordable. As has been said before in this article you can always invest any excess savings into an additional savings plan to produce a return.
Ultimately, the type of insurance policy to buy will depend upon your needs. While whole life is a better solution for some people, term insurance is better for others. Making a decision requires a deep consideration of your finances and your family's needs in the event that you pass away.
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