When looking for life insurance, it’s important to find the best policy for your own unique needs. There are so many web sites offering online discount life insurance, so it’s a common mistake made by many, to end up with a policy that’s not suitable.
Many people need clarification regarding the various types of life insurance, and which is best for them.
Term Life Insurance:
With term life insurance you pay for a predefined term, and are covered for that term (normally the same term as your mortgage).
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 also cheap, and can even become cheaper over time. There are also a number of different types of term life insurance to choose from as follows:
* The first type is known as level term insurance, and it is a very popular policy. Here, the premium costs are locked in for the entire term of the policy. This means you pay the same amount every month/year for the term of the policy.
* The second type is known as escalating term cover. This type of policy can be become expensive in later years, as you generally pay an increasing amount as the policy ages. However, there is an advantage, in that the payout at death also increases. This type of life policy is normally more suited to younger people.
* Next, we have decreasing term insurance, and in this type of policy monthly payments stay the same, although the amount of cover reduces each year.
* The forth type of term life policy is known as increasing term insurance. With this type of term life insurance the benefit on death increases. However, in order to make up for this increase you will need to increase your premiums at certain times, for example on the birth of a child, or as your financial circumstances improve.
* The fifth and final type is known as convertible term insurance. It is a type of term life insurance that you can convert at a later stage into an investment vehicle. The value of the investment is normally based on your health when you originally took out the policy.
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.
This type of policy is more expensive and complicated than term life policies. The investment you make earns some interest each year. So, providing your investment grows, your annual premiums can actually reduce over time. Also, there may come a time when the interest produced can cover all your future premiums, and as a result you may have no more premiums to pay on your policy.
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:
When it comes to the decision of whether to choose a term life policy, or whole of life insurance cover, the ultimate decision must be guided by your individual needs.
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!
Both types have their advantages and disadvantages, and careful consideration and advice from a competent insurance adviser is vitally important.
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