The Difference Between Whole Life And Term Insurance Policies
In the world we live in today, you have to be financially prepared, since anything can happen, as we have seen with the this past year or two’s financial crisis. Buying insurance coverage will ensure a person from experiencing any kind of financial ruin. You’ll find different types of insurance available to cover your vehicle, home, business, health, life and even your four-legged friend. In order to be able to obtain insurance suited to your needs and your budget, you have to be able to distinguish between the different types of insurance plans available, like term insurance and whole life insurance.
Knowing the difference between term and whole life insurance will be helpful when choosing between different types of life policies and may even help you identify what your insurance needs are. These policies have both pros and cons and they need to be considered and compared to your requirements.
Whole life insurance is also referred to as cash value life insurance. With whole life insurance the insured will be able to borrow the funds that has been accumulated through premium payments over a period of time to use for whatever valid reason. This, however, must be agreed to upfront in a written contract between the two parties. You’ll have to repay this borrowed money as a lump sum, or over a period of time, based on the arrangement between yourself and the insurance provider. One of the advantages of whole life insurance and one of the biggest differences between term and whole life policies is that the money that you used in paying off the policy can actually turn into one of your long term assets: some of the money you pay through monthly premiums goes to the insurance policy while the rest of the money is reserved for future emergencies like hospitalization or vehicle repairs.
Primarily, the main difference between term and whole life policies can be found in the names themselves. Term insurance policies will only have you covered for a specific period of time. Term life insurance policies do not allow you to have a savings account, which means you aren’t going to be able to borrow some of the money you have paid through monthly premiums. Yet another apparent distinction is the person that is allowed to purchase it: it is usually the head of your home with dependant children and major assets such as a house, property, business or vehicle. In the unfortunate event of the policy holder’s death, the dependants or beneficiaries will be paid out the money and should be able to take care of the person’s financial matters.
These are just some of the fundamentals associated with obtaining a life insurance policy. There is a lot more to consider, so it is advised that a person researches the various types of life policies available, as well as the different companies that offer them. It is important that you make the right decision when obtaining life insurance, as it is going to be an important part of your dependants’ or beneficiaries’ lives.
For more information on insurance policies visit our site on http://www.insurance.co.za
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