Life Insurance Shopping For The First-Time Buyer
If you’re thinking about getting life insurance, the first thing you should know is that life insurance comes in two basic types. Those types are whole life insurance and term life insurance, and the primary difference between them is that term insurance covers only a specific period of time. This is usually one to three decades.
Whole life insurance policies remain in place as long as the premiums are paid, or until the covered person reaches the age of 100 years. These types of policy begin to build up a cash value that increases as long as they exist, starting usually after the first year the policy is paid for.
Certain benefits are available to whole life insurance policyholders including fixed premiums over the life of the policyholder versus increasing premiums resulting from term life insurance policies. In addition, whole life insurance carries a guaranteed cash value. However, policyholders must maintain current premiums for both whole life and term life insurance to obtain the respective benefits.
Whole life insurance is a good option to consider for individual long range financial planning. Whole life insurance brings security of permanent lifetime insurance protection coupled with the ability to cancel or surrender the policy at any time for cash. In addition, there are tax advantages to whole life insurance allowing policyholders to save money overtime on a tax deferred basis.
Whole life insurance policies can be a good investment vehicle. Supporters even argue the cash value should compete with other fixed income investments. A policyholder can end up with a higher cash value than the guaranteed amount (variable policies do not carry guaranteed cash values) if the market performs well or the interest credit rating of the insurer strengthens. Policyholder’s also have the right to borrow against the cash value of the whole life insurance policy enhancing one’s credit profile.
The last attractive basic feature of whole life insurance one should consider, arguably the most valuable, is the opportunity to earn dividends. The dividends are set based on the overall return on its investments for the insurance company. While universal life insurance is often adjusted monthly, interest on whole life policy is adjusted annually.
You should not purchase whole life insurance if you cannot afford it or if there is a good chance that you may not be able to afford it in the future. It’s best, however, to purchase life insurance while you are still young. If term life insurance is all that you are able to afford, that’s better than no policy at all. The higher premiums found on whole life insurance are because they do cover you for the whole of your life; making it worth the higher costs if you are able to afford it. But whatever policy you choose, be sure that you can indeed afford it. Whole-life premiums will never change, and while this is good if you can afford it in the first place, if you cannot it can be very bad. Get life insurance, but get what you can afford. Any coverage is better than none at all.
