Insurance is needed because it provides financial security. You may have enough savings in your account but it is never sufficient to survive loss of life. The hospital bills, covering your expenses and looking after your family members will shake you from within. The savings that you made to retire early and enjoy your life may go into hospital bills. No matter how many precautions you take, life will toss you down if it has to.
Whole term insurance is one of the best insurance covers in terms of protecting your and the life of your family members. The whole life insurance will cover your life till the time you live. You do not have to worry at any point in your life. It never expires and lets you live happily when you are old.
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Whether whole life insurance is the right choice for you or not; you can find out below:
What does whole life term insurance cover?
It is a permanent type of cover that protects you throughout your life against unseen risks, provided you pay your premiums on time. Since whole life insurance guarantees payment eventually it will prove more expensive as compared to the term life insurance. But again, with the extra price you will have added benefits attached like accumulating the cash alongside the policy.
Benefits of choosing Whole life insurance:
Here are some of the benefits that you will enjoy with whole life insurance:
Steady premiums:The premiums in the whole life term continues throughout its duration. The installment will start at a higher rate in the beginning and may reduce as you progress in the later stage of your policy. The premiums can also be increased or decreased according to the age of buyer, you may have to pay higher installments initially for a certain period of time and as you reach a certain time or maturity in your policy, there may not be any further premiums needed to pay after that.
Fixed investment component: Along with your insurance installment, you will have an investment component in your policy. With your regular premiums, you may participate in the profits of the company through investment. The insurer will decide in this whole term insurance as how the investment component is used, it is usually with a steady rate of return with a reduced volatility. All the investments or returns that you will make in this insurance are tax -free.
Cash value: The whole life insurance also features a cash value, which increases with the time of your policy. This amount exists, if you choose to borrow against your policy, cancel it or surrender it. The withdrawal amount will be taxable so when you surrender, you will have to pay tax on the amount collected. If you choose to borrow, then you may have to return the amount in your policy, within a set time frame. This option of borrowing and surrendering will appear after a minimum time period of paying premiums perhaps in 10-15 years. The surrender fee is higher if you choose to take it at the initial time of its existence- example just after 10 years into the term, it will decrease as you let your term get mature.
Difference between whole term and universal term insurance:
If you are wondering whether to choose whole life insurance or universal insurance; these differences will clear your doubts regarding the same: The premium and death benefit for Whole life insurance is fixed throughout your life. Additionally the investment component in universal insurance is more flexible as compared to whole life insurance.
Premiums. In whole life insurance; your premiums will remain the same throughout the duration of the policy, whereas in universal life insurance premiums can be made higher or lower, according to the insurance company and the policy.
Death Benefit. As we discussed in universal life insurance, the premiums may reduce with time as you grow nearer to the end of policy, so the amount of death benefit can change too. The amount of cash value of your life policy at the time of death can be discussed before death with your insurance company. The death benefit in your whole life insurance grows alongside the investment portion, but is easier to predict.
Investments. Both whole life insurance and universal insurance policies have an investment component, but in universal insurance, the insurer decides where his investments will go. In whole life insurance, the same is decided by the company.