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Whole Life vs. Term Life Insurance Comparison: Discover the True Advantage

Having life insurance reduces the chances of going without coverage for catastrophic losses. Life insurance originated when there was a need for a person to have protection for a time. The covered person would do well to receive benefits if he or she dies within this time. Unfortunately, the length of time a person could be insured was not long. Changes occurred and protection became available for a person’s entire life.

With term insurance, as time goes on there is more chance of death, so premium rates go up. There are several different term policies available: renewable, where a person can renew the policy after a period of time with an increase in premium; decreasing, where the policy protection decreases annually; and convertible, where a policy can be converted to equity after one term. A whole life policy provides a fixed premium for life. A whole life policy generally has a higher premium than a term policy.

Initially, the premium coverage for a term policy will start out low and then increase over time. The increase covers the expenses of the policy. Whole life insurance has a high premium with a low starting amount. The additional cost is invested with an annual profit of five to six percent. Over time, the amount builds on top of the premium, then the amount is withdrawn as investment capital is earned.

Term policies have a lower premium, allowing a person to consciously invest extra capital, resulting in a higher return. The value of a whole life policy allows a person to obtain a loan for uses such as classes for her children. Many state-of-the-art policies come with benefits like dividend payouts and guaranteed returns.

When choosing between whole and term life policies, it’s crucial to consider how much capital is available and the objective outlined in the policy. The policyholder’s age, children and potential needs should also be considered.

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