Securing the best life policy can be a daunting task. The type of policy that best suits an individual will depend on their personal circumstances and financial situation. Whilst some people need comprehensive life long cover, others needs are fulfilled by cheaper and more simple, short term cover. Applicants who fall into the latter group are likely to be best suited by a term life insurance policy, whilst those looking for life long cover should consider whole life assurance.
There are a few main differences that set whole and term life polices apart. Firstly, a term life policy simply provides life cover, whilst whole life cover does this in addition to building a cash value, known as the fund. Secondly, term life cover lasts for a predetermined term, which typically lasts for between one and thirty years, whilst whole life cover lasts for life. The final main difference lies in the cost. Term life insurance is typically much cheaper than whole life cover.
For most people a term life policy will provide adequate cover. Some applicants will take out a term that will last until they have paid off their mortgage or until their children have left home. This gives the policyholder the peace of mind that their family will be financially protected in the event that they should meet an early death. When a term policy expires, there will be no payout. Such a policy will only payout if the life insured dies during its term and this payout will be made to the beneficiaries of the policy.
For some people the extra expense of a whole life policy will prove worthwhile. One benefit is that the policy will never expire and thus the policyholder does not run the risk of being left uninsurable, due to age or ill health. Furthermore, the cash value of a whole life policy may be accessed by the policyholder whilst they are still living. Thus, such a policy can provide life cover for the time of life that is most financially demanding, then, later in life, the policyholder may choose to surrender their whole life policy and release the cash value. This money may be used in a number of ways, for example, to pay for a wedding or university fees. Another advantage of whole life cover is that it provides additional tax benefits. These benefits will prove most useful to policyholders who have a large estate value.
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