Term life insurance post

Wednesday, January 23, 2013

Term life insurance, also called temporary insurance, covers a person against death for a limited time, the term. For example, the term might be until children are grown, or until college is paid for, or until retirement. You pay for the policy period and at the end of the term, the contract or policy expires. If no claims are made against the policy during the term, you don't receive any benefits after the policy expires, just like auto or homeowners insurance.


Term life insurance Whole life insurance, also called permanent insurance, is permanent and does not expire (assuming you continue to pay the premiums). It provides coverage similar to term life insurance, but it also provides an investment vehicle. A portion of the premium goes for life insurance, while the rest goes into an investment account. This account can be an interest bearing account or a variable (stocks and bonds) investment account.

Term life insurance Which is better (our opinion)? A young family with large financial obligations is usually better off with a term life insurance policy. The substantially lower premiums enable them to purchase sufficient coverage to protect against loss of income. Any discretionary investment funds can be placed in other vehicles (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than a life insurance policy. Whole life insurance is often purchased by people for tax and estate planning purposes. Recently, some advisors have started recommending life insurance as an investment. You should consult with your financial advisor.

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