Whole Life Insurance vs. Term Life Insurance

whole versus term life insuranceIn centuries pas,t life insurance has been used as a method of reducing risk to traders; when they travelled their goods and lives would be covered and should they die, their heirs would receive a sum of money. In present day life insurance remains essentially the same but its use has become more diverse the two main types being whole life insurance and term life insurance. Life insurance can now be used as a retirement vehicle, security for loans and to provide dividends. Now more than ever, deciding whether life insurance is right for your is exceedingly difficult. Investing in something as important as life insurance requires careful consideration and an informed decision.

Whole life insurance covers the policy holder for their entire life; in contrast, term life insurance is a policy which only lasts for a particular number of years, or a ‘term’, after which the policy holder may be given the option to renew the policy. In both cases the policy holder will pay a premium fixed at the beginning of the policy however in the case of a term life policy on expiration of the policy should you decide to renew it is very likely that your premium will increase.

Whole life insurance is more costly that term life insurance. This is because it comes with an investment portfolio as well with providing a death benefit. It offers the option of reinvesting the interest gained from investments to increase the death benefit. Term life insurance costs less because there it does not include the investment aspect of the whole life insurance policy.

Term life insurance is a death benefit policy, this means that upon the death of the policy holder a lump sum will be paid to the beneficiary under the policy. Whole life insurance is more diverse as its benefit can be paid in the form of dividends, used for cash advances or the entire policy can be cashed out at any time prior to the death of the policy holder.

The whole life policy guarantees the policy holder coverage for their lifetime. Conversely, once the term on a term life policy expires its death benefits are also extinguished. As a result if the policy holder outlives his policy which he had purchased specifically for a death benefit all his instalments would have been for naught. On the other hand, term life insurance may be ideal because of its relatively lower cost and duration if the policy holder simply purchased the policy to ensure that in the event of his untimely demise his family or beneficiary would not be left in an unfortunate financial position as regards a particular commitment.

If you decide that whole life is best to suit your needs, you are going to want to shop around. Because of the permanent nature of this type of insurance, it is advisable that you select from only the best whole life insurance companies. You want to make sure the company standing behind your policy is going to be around.

The above are some of the main factors to consider when determining which form of life insurance best suits your particular needs. Whole life insurance, although more costly, provides permanent coverage with a death benefit and the benefits of investment. It also allows you the freedom to cash out your policy prior to death. In contrast, term life insurance death benefits are only certain for a number of years and that lump sum will only be paid if you die within the term. The freedom of a term life policy extends only so far as to give you the option to convert it to a whole life policy. If your aim is to provide short term coverage for a specific number of years then a term life policy may be the better option.

Should I Buy Mortgage Life Insurance?

mortgage life insuranceI recently was meeting with a client and the topic of mortgage life insurance came up. They had recently been solicited for a policy and wanted to know if such a policy made sense for them.

Before we discuss mortgage life insurance, let’s make sure we are talking about the same thing. I am not talking about private mortgage insurance, typically called PMI. If you purchase a home and put less than 20% down, you will probably be required by your lender to purchase PMI. Private mortgage insurance does not protect you. It is there so that if you are unable to pay your mortgage, the lender is covered for the amount of the mortgage.

Mortgage life insurance is a policy that will repay your mortgage in the event of your death, disability, or some incapacitating disease. This type of insurance is not required. It is a decision solely up to you.

It rarely makes sense to purchase insurance for such a narrow purpose. When it comes to life insurance, you are usually better off analyzing the needs of your dependents, looking at what they would need to pay off debts and replace your income if you were gone, and then purchasing enough coverage to satisfy those needs.

In some cases, it may not even make sense for your dependents to pay off a mortgage. It might be more suitable for them to continue the mortgage payments and put the insurance proceeds to other purposes.

What I advised my client when this discussion came up is that any type of life insurance purchase should not be a kneejerk reaction to a solicitation by telephone or mail. These people are offering you a product without any knowledge or understanding of your overall financial picture.

Now, that does not mean that there are never any situations where mortgage life insurance does not make sense. Because these policies are typically mass marketed, they often have lower health standards in order to qualify. If you have a pre-existing health condition or are in poor health in general, you might pay a lot more for a standard life insurance policy that pays off your home versus purchasing a mortgage life insurance policy.

There could be special situations in your estate planning where maybe a second home needs paid off, and it is simpler to have a policy in place just for that need.

For the most part though, you are usually better off taking a look at your overall financial picture and simply buying more traditional life insurance to cover your home.

3 Tips For Shopping For Auto Insurance

shopping for auto insuranceShopping for auto insurance can be time-consuming, frustrating and just downright a waste of time if you don’t know what you’re doing. The first order of business is to understand exactly what is auto insurance. As simple as that may sound, many people honestly do not know what auto insurance is.

Auto insurance is simply a policy that protects you in the event of an accident. Depending on the type of insurance you have, you are protected if you’re at fault or not. It is designed to help you pay for your losses. It is a requirement by law in most states to have auto insurance coverage if you own and operate a vehicle. Failure to abide by this law could result in your license being revoked or suspended. There are basically three ways to shop for auto insurance. The most popular way these days is to shop online. Others prefer to do it by phone, and some people still actually do it in person.

Many people turn to the internet because of the savings, discounts, and overall convenience with not only auto insurance but everything in general. Shopping for auto insurance quotes online is relatively new but quite beneficial in so many ways. There are companies online that allow you to receive quotes from different companies and compare them almost instantly. Here you can actually select the company of your choice, print out the policy from the comfort of your home and presto, you have auto insurance. Shopping online for auto insurance also allows you take advantage of resources and valuable information to direct you through the process.

If you are a little unsure of what level of coverage is right for you, acquiring auto insurance over the phone might be a good solution. Over the  phone you can speak directly to an agent who can help and guide you in choosing the best policy to fit your needs. It’s not nearly as popular for shoppers to let their fingers do the walking through the yellow pages, find a company, and receive their quotes via telephone these days, but if you are new to buying insurance or thinking about making changes to your coverage, it is probably the right solution for you. It is still a fairly convenient way to shop, but it may take longer to go through the process.

Last but not least, you can walk into an office, get your policy and be done with it. If you are going to go this route, schedule an appointment in advance to avoid having to wait to see an available agent. Plus, you must make sure you bring all the necessary documents, including the vehicle to be insured, to speed up the process and get you the best quote available.

All three methods are viable, and combining them is also a good way to go. Find some quotes online, and then walk into a local office with those quotes in hand. See if they can beat the quotes for you and get the best rate possible.