Term Life Insurance and Whole Life Insurance Policies Explained
Dean Shainin

There are two categories a life insurance policy will usually fall into, and they are either whole life insurance or term life insurance.  Some can be a blend of both.  There are also some generic policies available where you can change the amount of cover and price to suit your individual needs.  If you choose a variable life insurance policy, this means you have control over what portion of your payment is invested, and what portion is for life insurance premiums.

Term Life Insurance

If you choose to have a term life insurance policy, you are covered purely for claims relating to death for a specified period.  It could be for anywhere from five to thirty years, and when the policy ends, there are no savings or bonds paid to the insured.  The policy is only paid out if the insured dies during the period of cover.  The problem with these policies can be if they end before you pass away you are left to start all over again with a new policy.

The reason many choose term life insurance is because the premiums are much lower.  The price goes up as you age and the risk for the insurer increases, and past middle age the premiums are comparable with whole life policies.  An example might be if you chose to have $250000 cover for term life insurance, and you were thirty years old, your premium might be $125 per month, where as if you were forty five it might be more like $175 per month.  Once you are sixty or over, the premiums can go up phenomenally to something like $1750 per month for the same policy.

Whole Life Insurance Explained

When most people refer to having life insurance, they usually mean they have a whole life insurance policy.  The terms and conditions for a whole life insurance policy will usually state you are covered until you either turn 100 years old or pass away.  Sometimes it is referred to as a permanent life insurance policy or ordinary life insurance policy, and the premiums are broken into brackets depending on the amount of cover and policy guarantees.

If your policy is a whole life policy, you should have the option to claim funds in case of emergencies or to fund your retirement.  This is because part of the premium contributes to the insurance, and part of the premium is allocated for savings.  They are also fixed rate premium life insurance policies so you don’t need to worry so much about fluctuating prices.

The difference between the risk calculation for general home and car insurance compared to life insurance is interesting.  When an assessor is calculating the chance of you making a claim, they know you will some day pass away and your policy will be paid on.  With car or home insurance, there is no guarantee the insured will ever need to make a claim, so the risk is very different. 

There are some great websites for doing multiple quotes online for your life insurance policy.  Make sure you get a few quotes so you know how your insurer compares, and check the company you are considering is strong in the market and will be around for the long haul.

Dean Shainin is a well known writer of http://www.MyWisdomBase.com a directory designed to provide current information, resources, tips, services and state of the art products.