Term life insurance is the simplest in structure and favored by most people today because of cost. Term life insurance provides coverage for a specific period or term. It is sometimes referred to as temporary insurance. The policy pays cash benefits to the beneficiary if death occurs within the specified period or term. Term insurance provides protection for a specified period of time. The insured must die within the specified period for the beneficiary to be paid the benefit. If the policy is not renewed on the expiration of the specified period or term, the coverage ceases. There are no cash benefits if the death occurs after the coverage ceases. A term life insurance policy has no financial investment value and most of the premium goes to pay for the coverage.
A whole life insurance policy is one can keep for as long as you live and that will pay the face amount to your beneficiaries. Generally there are two types of whole life insurance policies: participating and non participating. A participating policy has cash value and earns dividends if the life insurance company performs efficiently, but dividends are not guaranteed. A non participating policy has cash value. It does not pay dividends. If you keep a whole life insurance policy for a specific period of time, the policy will build up guaranteed cash values which pay a guaranteed interest rate each year accumulating a considerable sum over time.
There are times when term life insurance is your best option. If you are married with kids and a spouse who doesn’t have the earning potential to get your children through college, then term life insurance is probably the best answer for you. Once your kids get to college, your need for income reduces and you no longer have to worry about the costs of their education. Again if you are in a working in a dangerous profession or you have developed a dangerous hobby, term life insurance will be better suited to your requirements. In such situations, you may regularly face the risk of death. You are better for with a term life insurance which will be effective till you change your job or give up your dangerous hobby. You ae better off with term life if you have less money to spend on an insurance policy. It is also perfect if you have an immediate, short term need for life insurance.
