All life insurance policies can be categorized as “term”, “whole life”, or a combination of the two. This means there are many different variations in policies.
When you have opted for the universal life insurance, you can adjust the premium and the policy to any extend you think you need.
If you want control over the financial and investing aspects of your insurance policy, your best option would be a variable life insurance policy. This policy is similar to a universal policy in that it accrues cash value, but you can choose how this cash value is invested.
So what’s a term life insurance policy?
A term life policy provides protection for a predetermined period of time, such as 5, 10 or 20 years. At the end of this time the policy expires – the death benefit is only paid while the policy is in effect. A term policy doesn’t accumulate any cash value. Term life insurance has been described as “insurance that is actually designed to expire before you do.”
Although premiums on term life policies tend to be low, they increase significantly as you age. Because of this, a term life policy is usually purchased when you’re young, to cover a long term. While short term renewable policies are initially less expensive, the premiums begin to make them less reasonable after middle age.
In a term life policy that renews annually and carries a $200,000 death benefit, the annual premiums might look like the example below. Remember, these are just examples to show the differences in cost with age:
$300 / year age 35
$900 / year age 50
$2,500 / year age 65
Description of a Whole Life Insurance Policy
A whole life insurance policy remains in force until you either die or reach age 100, so long as you pay the premiums on time. Whole life is the most common type of life insurance sold. Whole life is also known as “ordinary life” or “permanent” insurance. The main characteristics of a whole life insurance policy are level premiums, level face amounts, guaranteed values, and a relatively high degree of safety. Whole life policies accrue cash value over the life of the policy; a policyholder can access this cash for emergencies, as a supplemental source of retirement income or for any other needs.
This ability to access the cash accrued by a whole life policy makes it an important savings instrument. Whole life policies are often used for long-term financial planning. Another very positive aspect of whole life insurance is the level premiums: they don’t change, so you’ll always know how much your policy is going to cost. Level premiums provide peace of mind and make budgeting easier.
The risk factor in this policy is entirely different from the auto policy. In the auto policy the insurance company hopes that the driver will never encounter an accident and will be safe. But on the hand the when issuing a whole life insurance policy, the company is sure that the policy will be claimed one day.
Shopping for life insurance is now quite simple to do online. You can compare companies and policies to make sure you get the best premiums for the policy that meets your needs. It’s well worth the time to get several quotes, and to see how the companies are rated with the Better Business Bureau. It’s also important to look into the financial standings of the companies you’re considering before you sign up for any type of life insurance policy. If you do your research, you will easily get the best whole life insurance policy online.
Graham McKenzie is the content syndication coordinator a leading South African Life Insurance and Life Cover website.
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