Whole Term and Universal Life Insurance
Whole life insurance coverage typically offers more protection than term life insurance. The former pays out to the beneficiary once the insured individual passes away, while the latter offers an insurance policy for as long as the covered individual lives. As with any other insurance product, buyers of whole life policies should shop around to get the best deal possible. There are a number of ways to obtain affordable whole life policies.
One option is to purchase a policy in its entirety, meaning that the death benefit is paid out to the beneficiary when the insured dies. Whole life insurance policies are often paid out as a single lump sum, or in fixed monthly installments, which is nice if you don’t want your policy to be paid out too soon. However, if you’re shopping for whole term life insurance, make sure you shop around different companies, and to ask for quotes online from at least three insurance companies.
Another option is to purchase a policy in conjunction with a term policy. The death benefit in a whole term life insurance policy will last only until the death benefit is paid out. For this reason, it’s important to have beneficiaries receive the full benefit if you die prematurely. With a term policy, the benefits may be paid out based on when you die.
Some whole life insurance policies pay dividends periodically. These dividends are tax-free and allow the premium to be used as capital. The rate of return varies, according to the rates of return of the specific investment. If the investment yields minimal returns, then the premiums paid might be less than the benefits.
A contract holder who purchases a traditional whole life policy is required to take an immediate annual exam. It’s also important that he or she understand the terms and conditions governing the contract. While most whole life policies offer guaranteed issue provisions, it’s still a good idea to read the contract carefully. For example, some contracts specify that the premium be held by the contract holder in interest only, while others specify that the premium be used to purchase a predetermined amount of cash value insurance coverage. Whole life insurance coverage typically requires the contract holder to pay a dividend once a year, quarterly, or annually.
Another option for whole life insurance policy holders is to purchase universal life insurance coverage. This is a more flexible type of coverage that allow the policyholder to shift money between the policy and a bank account, credit accounts, and even investments. Unlike term life policies, universal life policies do not require annual examinations and usually only require a one time payment. Although they tend to give more flexibility than term life policies, they are often less expensive. The one-time payment required is often well worth the cost of this flexible coverage.
Choosing the type of whole life insurance coverage that best meets your needs should be based on both your financial status and your goals. If you anticipate needing to make additional payments after the original term, universal life policies make sense. However, if you have a fixed income and long-term goals that have little to do with future earnings, term life policies make more sense.
Whole and term life insurance policies both provide financial protection and other conveniences that help us cope with the loss of our loved ones. In addition, these types of policies can help our surviving family members meet expenses and cope with the financial consequences of a loss. The important thing is to shop around and consider all of your options.