Life Insurance – Whole and Term
Whole life insurance is good for the duration of the policyholder’s life. It may also offer additional benefits beyond the death payout. Term life insurance is coverage that stops when the policyholder reaches a certain age. At that time, the policyholder no longer has insurance coverage and no benefits are available upon their death. Term life insurance has no additional benefits, and only pays out if the policyholder is current with premium payments.
Whole life insurance is good because it offers financial support for the beneficiaries, and can gain cash value over time. It is a financial planning instrument, and is useful in case of a financial emergency. Whole life insurance is active as long as the policyholder stays current with payments. The death benefit is paid upon the death of the policyholder.
A whole life insurance policy guarantees payment when the policyholder dies. The policyholder must make payments that normally remain at a fixed price. Term life insurance is different, in that the premium payments can increase as the policyholder ages. Whole life insurance rates never increase.
Types and Payouts
A whole life insurance policyholder can withdraw cash from the policy. They can also leave the policy as is, and never withdraw money. The policyholder can withdraw the full amount of the policy. If they withdraw the money, then the policy becomes inactive.
The policyholder can also withdraw interest gained on the policy. Another option is to borrow money on the policy. If the policyholder borrows money, then the policy remains active and the amount available is reduced. The policyholder can repay the money, and upon their death, beneficiaries receive the total amount of the policy.
With term life insurance, the policyholder cannot borrow money from the policy. The beneficiaries receive a payout when the policyholder dies. The policyholder cannot receive any financial benefits from the policy.