If you have a good handle on the basics of life insurance, you may be wondering more about the intricacies of a life insurance policy. This is a good question to have answered before you buy life insurance, because a little bit of education in this area can go a long way towards getting yourself the best policy available at the best price.
Life insurance comes in different varieties: term and whole life insurance. We’re going to compare term vs. whole life insurance and give you a clear and concise summary of the differences between both types of policies. After this, you should have a good enough idea about life insurance policies to make an educated and well-informed decision.
Term Life Insurance
The first type of life insurance is called term life insurance. It is also the most common type of life insurance. Term life insurance mimics other types of insurance – automobile, health, or house, for example.
It is a simple contract between you and an insurer that allows you to collect money in the event of your own death.
No frills or extraneous terms and conditions are built into this policy.
It is typically very cheap when you are at a young age, and gets more expensive the older you get. This makes sense because insurers must increase the risk of your death as you age.
Whole Life Insurance
Whole life insurance offers a more complete package that includes the benefits of term life insurance, but with extra features.
You accrue a cash value in your policy that you may access in certain situations. If you need to pull that money out for any health or home expenses, you can do that without a problem.
However, you are pulling that money out of the pool that will go to your beneficiaries as soon as you die.
If you’re in an extremely dire situation, you can surrender the entire policy and get the cash value. This added flexibility definitely adds some complexity to the policy, but if that’s what you’re looking for it may be a better choice.
Now that you know the basics of each type of insurance policy, you can make a better informed decision. Be sure to compare rates with as many different providers as possible. Every bit of extra research that you put into finding the best policy for you is going to increase the chances that you actually DO find the best policy.