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Choosing between a Whole Life Insurance Policy and a Term Life Insurance Policy
A life insurance policy is not the same as life insurance. The former offers you life coverage up to a fixed period, while the latter covers your dependents financially once you pass away. There are certain aspects that separate life insurance from life insurance. Read on to know them.
Life Insurance is not a traditional life insurance policy. It does not accumulate a cash value equivalent to the amount of money that you would have paid into it. Instead, the insurance company will pay your benefits for you and your family as a means of showing their concern for your well-being and for the future of your dependents.
The biggest difference between life insurance and life insurance is the length of time covered. A life insurance policy is usually for a fixed period of time. The time period can be anywhere from one year to 30 years. The term may be fixed or renewable. With a renewable term, your beneficiaries may receive payments for a pre-determined number of years after your policy expires. With a fixed term policy, your beneficiaries will receive payments during the entire life of the policy.
Another difference between life insurance and life insurance is the way you will pay your premium. With a life insurance policy, you will pay a premium, typically a percentage of your life expectancy, each and every year. Your dependents will receive payment when your policy expires. They will also receive an additional payment, called the terminal benefit, if they should not be able to pay out the premiums when they are due. With life insurance, your dependents will receive the money you left for them when you passed away, regardless of their ability to pay.
Life insurance is also divided into two parts: insurance of the life of the policy itself and insurance of a named beneficiary. With insurance of the life of the policy itself, your family will receive payment upon your death for the cost of your life insurance policy. If you leave behind a spouse or children, they will be able to take care of them and make sure they can afford to do so. If you have no children, they will simply become members of your family and will not receive any payment from the proceeds of your insurance policy. With life insurance policies, your family will receive the proceeds of the insurance if you pass away, regardless of the reason.
One type of life policy is called “conditional” life insurance. If you should die during the term of the policy, your dependents will get the lump sum of your insurance policy proceeds. For example, if you die while your child or children are still dependent upon you, your surviving spouse will receive the entire remaining balance of your policy, but nothing more. A term life policy like this is generally less expensive than other life policies because it does not require any payment for the remaining period after you die.
You can also choose a life insurance plan that has a benefit attached to it that continues after your death. These types of policies provide your beneficiaries with money to assist them with expenses, such as college tuition. However, you may want to think twice about these policies. Because you don’t get money during your lifetime, you could end up not having enough money to pay for your loved ones’ college expenses. Also, if you decide to cancel your life insurance policy, then the amount of money remaining at the time of cancellation will be paid to the company instead of your beneficiaries. Some companies will allow you to transfer your cash value to an interest bearing checking account, but you will forfeit any premiums already paid.
As you can see, there are benefits to both types of life insurance policies. If you need a policy to help ease some of the financial strain on your family, an HSA-based policy may be a better option for you. If you are confident that your family will continue to need financial support after your death, then you can opt for a whole or term life policy that will guarantee a certain level of income for your family after your passing. Whatever type of life insurance you choose, just make sure that you take the time to investigate all of your options before making your final decision.