Saturday, 20 October 2012
Thursday, 11 October 2012
Whole And Term Life Insurance - 2 Sides Of The Same Coin
It actually depends upon how you
look at it, some things could be the same while others could be worlds apart.
The same in the real sense can be said of insurance products/packages. The fact
that they are professionally designed for people means that they are familiar
to the behavior of many of the people towards their products who identify with
them. On the other hand, given that each person has a different need that calls
for insurance, that makes this field diverse as well, enables them to make
their packages more saleable and attractive.
It preferably deals with lives by
insuring lives and securing properties and futures. That is why of all the
products that are purchased, the life cover tops the list. Life is considered
one of the most important possessions yet at the same time, the most fleeting.
Actually, all the probability
studies that come with determining life expectancy, it is yet impossible to
tell when one is likely to face demise. However, it falls on companies to take
this into account and figure out the best possible fit for any person looking
for life coverage.
To accomplish this, it is important
to offer policies that are flexible to the customer, that are more adaptive,
and options that they can explore customer. It is against this history that two
packages have been developed; whole life insurance and term life insurance. These
are two types of protections that aim to offer a flexible approach to securing
the future of your loved ones with your life.
Whole life Insurance
As the name suggests, the whole life
insurance policy seeks to provide cover for the entire time the insured person
is alive. The insured is able to make contributions also known as premiums that
secure a certain amount of money as the claim/death benefit. The insured will
have already communicated to the firm the likely individual(s) who would be
noted as beneficiaries upon the demise of the insured.
In such a way, once the claim matures,
they would stand to own the assets that the insured held against the claim and
only when the insured died. The question is that should the insured wish to
access the money before his demise, it is payable but upon deducting dividends
and the death claim is not released.
This type of insurance cover is in
fact a modification of the whole life cover. In this policy, the claim is made
for a fixed term, it does not cover the insured for their entire life. Should
the insured pass on before the term expires, what is known as a premature
death, the claim is then payable to the beneficiary.
The insured makes fixed payments
during the fixed term agreed upon. When the agreed period of the insurance
expires, the insurance cover is withdrawn and is only restored upon re-negotiation
of a new insurance term.
Disadvantages
1 - Term insurance can only be kept
for limited periods of time. It can be quite overwhelming if an insured should
die after the term policy has expired.
2 - Some policies can be renewed
after the term period but for increased and extra cost. This cost can be
prohibitive.
3 - You will lose your coverage at
the end of the term period. The problem is that you may need some life coverage
at that time but you are older then and may not be able to qualify because of
health conditions even if you can pay the higher premium. For me, this is the
biggest disadvantage of all times
4 - For some reason term insurance
tends not to remain in force for the entire period it was bought. Perhaps this
is so because these policies do not accumulate cash values and as a result
there is not much to lose by terminating the policy.
For the reasons mentioned above it
is always wise to keep your policy in force for as long as the contract allows
you to as one never really knows when death will occur.
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