Navigating different types of insurance policies can quickly become overwhelming, especially since there are so many different options to choose from. Term and whole life insurance, for example, are two of the most popular types of cover and they offer a wide range of pros and cons to policy holders and beneficiaries.
Keep in mind that the choices you make now could end up having an enormous impact on your beneficiaries further down the line.
What is Whole Life Cover?
Whole life cover is basically what it says on the box – it covers the policy for the duration of their life. It doesn’t matter when the policy holder dies, the dependents will be paid out.
Keep in mind that because this type of policy will pay out regardless of when the holder dies, this also means that the premiums will be higher than other types of policies, including term policies.
What is Term Life Insurance Cover?
Term life insurance only covers the policy holder for a specific amount of time, such as 25 years. While the policy will pay out in the event that the policy holder dies within this specific period of time, it will come to an end once this period is up.
Because this type of policy might not end up paying out, it should be noted that the premiums are usually much lower, making it a more appealing option to many people.
Why Choose Term Life Insurance?
One of the main reasons a person would choose term life insurance is because they want to ensure that a large loan, such as a mortgage, will be paid in the event that they die.
In fact, it should be noted that many lenders will require mortgage applicants to have life insurance before they approve the loan.
Can Term Life Insurance be Extended?
Yes, you can extend a term life insurance, but it will usually come at a much higher cost.
Those who want to ensure that they have life insurance beyond a fixed period should consider alternate options to extended term life insurance because of the high costs involved.
Which Policy Should I Choose if I Have Children?
There are benefits of opting for both term and whole life insurance if you have children.
Firstly, if you want to ensure that your children will be provided for in the event the worst should happen, term life insurance will help them get through school, university and perhaps even provide them with enough money to purchase a home. Whole life insurance, on the other hand, will benefit them even at a later stage in their lives.
What is Increasing Term Insurance?
One of the options for those investing in life insurance is to opt for an increasing term insurance. Each year, the overall pay-out amount will increase and so the premiums will rise along with this.
This is usually opted for by those who don’t want their pay-out to be impacted by inflation. Keep in mind that if you want to stop this increase, you will usually be able to do so by calling the insurance company and opting out of the increasing term insurance.
What is Level Term Insurance?
Level term insurance is a policy that remains the same throughout its duration, so you won’t be expected to pay more or less throughout the term.
Keep in mind that while you’ll be paying the same amount, the pay-out will also remain the same.
What is Decreasing Term Insurance?
If you’re opting for life insurance simply to cover the costs of a mortgage, for example, decreasing term insurance will likely be the best possible option for you.
This is because the overall policy will decrease with each passing year, allowing your premiums to decrease along with them.