From the outside, the process of purchasing a life insurance policy may seem simple to some, not so much for others.
This process can be very intimidating and confusing to understand the difference between term life insurance and whole life insurance.
That is where National Educational Services comes in to help you understand your options when purchasing a life insurance policy that is best for you.
Understanding Term Life Insurance
Term life insurance is a specific plan that only offers life insurance coverage for a certain amount of time.
This specific type of life insurance is best used as a way to protect your financial situation for a short period of time so that those who rely on your income are protected. With these term life insurance policies, you can purchase a premium with coverage for any specific time frame.
When purchasing a term life insurance policy, you are given the opportunity to purchase a relatively long amount of coverage for a smaller premium.
While the cost of life insurance policy premiums varies based on various factors such as:
- Amount of coverage
For the most part, when purchasing a term life insurance policy, you are able to do so for a very low price, sometimes for less than one thousand dollars. Although, it is very common to see a cost increase after the initial terms of your policy ends.
Finally, you should understand that when purchasing a term life insurance plan, you will not be given your money back unless you made the decision to purchase a return premium rider.
Understanding Whole Life Insurance
Whole life insurance provides you with lifelong insurance coverage as well as the opportunity to develop and grow cash value. This type of life insurance policy provides you with permanent coverage as well as a death benefit, which is paid out throughout your life. When purchasing whole life insurance, as long as you continue to pay for your premium, you will be covered through your entire life.
Additionally, whole life insurance policies have a cash value. When you are paying for your premium each month, part of this money goes towards the cash value of your policy. Once you have reached the point in which your life insurance policy has a decent-sized cash value, you are then able to withdraw the funds or borrow them in the form of a loan.
Due to the nature of life insurance, each company has different rules and procedures about the process of withdrawing funds to access your policy’s cash value.
With that being said, certain life insurance policies and plans may also allow you to earn dividends as a policyholder. If you are offered the opportunity to collect dividends, there are various ways you may access your funds.
- Withdraw funds as cash
- Use the funds to pay for your premium each month
- Leave them in your account to generate interest
Differences Between Term and Whole Life Insurance
While term life insurance policies and whole life insurance policies may seem similar in many ways, as we noted earlier in the explanations of both policies, they are also very different, listed below are the main differences between term life insurance policies and whole life insurance policies.
Term Life Insurance
- Coverage for only a specific time period
- Lower premiums
- Provide short-term financial security
Whole Life Insurance
- Coverage for your entire life
- Have a cash value and the possibility to earn dividends
for more information on life insurance, read our blog posts here: NES Blog Life Insurance Archives
Get Life Insurance From National Educational Services Today
The bottom line when it comes to purchasing a life insurance policy is relatively simple, as term life insurance and whole life insurance offer two different forms of coverage.
Term life insurance policies provide policyholders with short-term coverage for a fixed period. Whereas whole life insurance policies provide lifelong coverage and the opportunity to grow wealth through the cash value of your premium.
Understanding which plan is right for you may be difficult and hard to understand where to even begin in the process.
Contact an advisor at National Educational Services today to get the ball rolling and review the different types of life insurance plans to find one that is right for you.