Life insurance is an important financial protection instrument to obtain. Life insurance provides loved ones with money in the case of the insured person passing away. The two main types of life insurance are term insurance and whole life insurance.
Term insurance is financial coverage for an insured individual that is only available during a set period of time, or a term. Term insurance and mortgage loans usually go hand and hand. At Irish Mortgage Brokers, in order to take out a mortgage, the home buyer would need life insurance for at least the duration of the mortgage loan.
There are three different term insurance policies: Level, Decreasing and Convertible. The Level Term policy has a stable amount of coverage throughout the term. The Decreasing Term policy decreases the amount of coverage overtime until the end of the term. Finally, the Convertible Term policy allows for the insured to extend their term of insurance during their current term.
Here are the advantages and disadvantages of term insurance:
Term Insurance – Advantages
- Insured can choose their term
- Lump-sum of money if insured passes away in the set term
- Affordable life policy – inexpensive premiums compared to whole life
Term Insurance – Disadvantages
- Insurance expires when term complete
- If the insured remains alive, insurance company does not pay anything
- Zero Cash Value – cash cannot be taken out prior to term end or death
Whole life insurance, on the other hand, is an insurance policy that provides coverage for the insured individual’s entire life. As long as the individual with whole life insurance pays the monthly premiums, the insurance company is responsible for coverage, regardless of how many years the plan. Although costly, an insured individual can also end their whole life insurance plan and receive money, unlike term life.
Whole Life Insurance – Advantages
- Since insurance policy is whole life, the insurance companies must cover insured
- Fixed monthly premiums do not change
- Loan in cash value of the policy can be taken out prior to death
Whole Life Insurance – Disadvantages
- Existing conditions may turn away insurance companies more than term insurance
- Significantly expensive premiums
- Ending policy could result in significant loss of money