Finally, you have decided to invest in a life insurance cover. That’s a bold as well as positive step. With life insurance, you get the peace of mind you require to embark on your daily activities without worrying about emergencies. Plus, it will caution your family from future expenses in case you are incapacitated or gone. In a nutshell, taking life insurance is a noble idea. It shows a high level of responsibility from your side. However, you should choose the right type of life insurance. Life insurance is broadly divided into two. They include:
- Whole life insurance
- Term insurance
To help you choose the right choice, this article is going to delve into each option, giving you the benefits, drawbacks, and other important basics.
Understand Permanent Policies
Permanent life insurance policies are available as whole life and universal life. Since both of them offer financial benefits to your beneficiaries upon your death, differentiating between the two can be quite difficult.
Whole Life Insurance
Whole life insurance policies have a fixed premium. That means you’ll pay the same amount of premium every year for your coverage. Plus, the cash value is able to accumulate over a period of time, allowing you to borrow against the money that has accrued.
On top of providing life insurance protection, a whole life insurance policy also accumulates a cash value. If you want a policy that has a cash value accumulation, insurance coverage that remains active so long as you make timely payments, and premiums that remain constant throughout, then go for a whole life insurance policy.
Universal Life Insurance
Universal life insurance is characterized by flexible premiums, which allow you to determine the amount of money you’ll pay every year by utilizing some of the policy’s cash value. But you’ll have to pay the minimum premium amount, otherwise, the policy will lapse.
When you purchase a policy, the insurer will suggest a minimum interest crediting rate. If the insurance company’s portfolio earns more money than the minimum interest rate, then the insurer might add excess interest to your life insurance policy. Because of this, universal life insurance policies are more likely to earn more than whole life policies over a period of time.
If you want the flexibility to adjust your premiums or coverage amounts, as well as permanent life protection, consider investing in a universal life insurance policy. It also comes with a cash value that you can always borrow from so long as you are still alive.
Are you looking to purchase life insurance? Are you overwhelmed when it comes to choosing between whole and term life insurance? Well, you aren’t alone. Choosing the right policy can be challenging and overwhelming—especially if you don’t have proper guidance. Luckily, the above article has been prepared by money expert – life insurance to help you make an informed decision. Among other things, you will learn about the benefits and drawbacks of each option.