There are two basic types of life insurance:
– Term Life Insurance
– Whole Life Insurance
Term life insurance is simply a contract that calls for you to pay a premium for a certain number of years for a certain face value of life insurance. The length of the contract can vary from 1 to 30 years. If your term policy ends without your death, you receive no benefits. If you die before your policy ends, you survivors receive the full face value of the insurance.
Whole life insurance is a long term policy best life insurance in which you pay premiums that provide for both life insurance and a “cash value” investment plan. When the policy is surrendered, it either pays the face value death benefit (if you die) or the “cash value” of the policy. Often the “cash value” of your policy is determined by a fixed rate of return on your premium payments. After some initial period, you can borrow against the cash value of the policy. The premiums for whole life insurance are higher than for term life insurance.
Whole life insurance is also offered with some variations in premium payments and face value amount. Such variable plans can be called universal life insurance, variable life insurance, or other names.
Several factors are important when considering whole life insurance. You should clearly understand:
– When Cash Value Begins to Build: Often whole life insurance policies do not allocate much of your premium to begin building a significant cash value before you’ve paid into the policy for 10 years or more.
– Rate of Return: The rate at which your policy builds cash value is often below the rate you could get if you invested elsewhere.You should carefully investigate both term life insurance and whole life insurance plans. It is often wise to consider buying a term life insurance policy and investing the excess of what the whole life insurance policy would cost. That way you would have the benefit of both life insurance and a higher rate of return on your investments.