An easy example of which to choose is based on a very hard-to-answer question. How long do I need the protection? One fundamental thing to understand is that life insurance is not an investment, regardless of what an insurance agent tells you. Life insurance is for protection and protection only.
The two primary reasons for the purchase of life insurance is because of love or debt. You either love someone or you owe someone. Whole life is for your whole life. Term insurance is for a “term” period.
Here are some basics of whole life.
Whole life is the right solution if you’re looking for permanent life insurance that will produce guaranteed cash value. This product is ideal for an initial life insurance purchase, to cover a child or grandchild, or to assist in business situations. The cash value of this policy is accessible when you need it, such as in an emergency or an unexpected opportunity. Whole life provides a guaranteed premium, death benefit, and cash value. Your premiums remain the same and are paid until age 90. Many whole-life policies also will pay dividends, which can be used to reduce premiums or to add to the cash value. Whole-life contracts offer guarantees such as nonforfeiture options.
Nonforfeiture Options: To protect yourself if you are ever unable to pay your policy premiums, you can choose one of our four nonforfeiture options.
• Automatic Premium Loan: Needed money is automatically borrowed from the cash value to pay overdue premiums, and interest is charged until the loan is repaid. If this option is not elected, or if the cash value will not cover the premium amount, the nonforfeiture option will default to Extended Term Insurance.
• Extended Term Insurance: This keeps the full death benefit in force by using the cash value of the policy to purchase Extended Term Insurance.
• Paid-Up Insurance: This option will maintain some level of protection in force by using the policy’s entire cash value to purchase paid-up whole life insurance. The face value of the paid-up insurance will be less than the face amount of the whole life. The paid-up policy remains in force until the insured dies.
• Cash Surrender: The policy can be surrendered for the accumulated cash value. Any outstanding loan balance and accrued loan interest will be deducted from the cash value.
Other contractual benefits available are:
• Waiver of Premium: This provision waives the payment of all premiums that come due during the disability of the insured person. Most policies require a six-month waiting period before the benefit begins.
• Indexed Protection Benefit: This benefit allows for an increase in the death benefit. It is generally tied to the Consumer Price Index (CPI).
• Additional Purchase Benefit: This benefit guarantees the ability to purchase additional insurance at future dates or events such as marriage or the birth of a child.
Term life insurance can offer benefits as well, but they will be limited to a specific period of time. In deciding which policies to purchase, consider how long the benefit may be needed to complete the desired need.
Term insurance is for a specified period of time; whole life insurance is for your whole life.
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