We all must die one day, but the thought of not protecting our loved ones once we pass is a nightmare. Not only will the deceased love ones emotionally grieve their loss, but they also will be suffering financially. Thus, it is imperative to get life insurance to ensure this horrific scenario will happen.
The main two types of life insurance out there is whole life insurance and term life insurance. Learning the differences between these types of life insurance will help potential insurers choose the right type of life insurance for them.
Term Life Insurance
This type of insurance has three primary components: The premium to be paid (the insured’s cost), the face amount of the death benefit (protection), and the term of coverage. If the insured person passes away within the term of coverage, a beneficial face amount is provided to the beneficiary. However, If the insured person dies after the end of the term, there will be no beneficial payment amount for a beneficiary.
Whole Life Insurance
Whole life insurance, however, is a type of permanent life insurance. So, the policy includes savings in addition to the insurance. A part of the insured person’s premiums is applied towards insurance, and the rest is invested in building a cash value. The insured is paid the cash value if the insured lives beyond the policy expiration. Also, the insured can use the cash value to borrow money. By investing the cash value in the money market or in stocks and bonds, there will be a gain. While the insured is still living and the policy is cashed, the gain will be tax-deferred. Nevertheless, the beneficially will obtain proceeds that are usually tax-free anyway if the insured dies.
Other Important Factors
There are other factors to consider before deciding which type of life insurance is right for you and your loved ones. They are as follows:
- Term life insurance is much more affordable than whole life insurance.
- In the US, it can be much more difficult to get term life insurance if you are over 50 or 65.
- If you need life insurance with a term of fewer than 10 years, the most cost-effective insurance is most likely term life insurance.
- Whole life insurance is most likely the most cost-effective one for a term of more than 20 years.
For more information about these types of life insurance, Wellspring Insurance Network Inc.is the way to go. With over 10 years of experience, this insurance agency has been providing insurance relief in Frederick, MD, and surrounding areas for years. Wellspring Insurance Network Inc. is located in Frederick, MD, and they will be more than happy to assist you. Contact them now!