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.
Many people need clarification regarding the various types of life insurance, and which is best for them.
Term Life Insurance Benefits:
Term life policies cover you a predefined term.
Term life insurance only offers protection for the duration of the mortgage, and is normally of no value when your mortgage is paid off.
Term insurance is generally cheap and is expected to fall over time providing you don’t suffer from a major disease. However, there are a number of different types of term life insurance policy:
* 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 cover is increasing term insurance, where the pay out on death increases. However, to make up for this increase it will be necessary to increase the premiums from time to time, in line with changing circumstances.
* 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:
Whole of life insurance covers you right up until the time of your death, providing that you keep paying your premiums. It can give a considerable lump sum to your family when you die, and it normally accumulates in value over the years.
The amount generally increases in value over the years. Also, the contributions you make to your policy normally earn interest each year. When this happens, your premiums may reduce over time, to the point where you no longer have any 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:
Buying a term life policy, or whole of life insurance is an important decision and one that needs to be made carefully. Before you take the plunge, you need to examine your needs, and exactly 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!
There are advantages and disadvantages to both forms of insurance, so it’s always important to get advice from a competent insurance adviser.
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