When you are buying life insurance, you need to decide between whole and term life insurance. 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.
Whole life insurance is best used as an insurance policy to protect your loved ones from funeral costs and final expenses. If your payments lapse because of your death, which is discovered later, then your whole life insurance policy is considered valid and comes into effect to protect your family from the costs associated with your death. A whole life insurance policy will not protect your family from large debts or from payments on something expensive like a house, however it will help with the immediate costs associated with losing a loved one.
If you are interested in a larger amount of money for a particular reason, then you are actually looking for term life insurance. Term life insurance is a special kind of life insurance which is designed to sustain a much higher potential payout for a shorter period of time. Term life insurance is very helpful if you are about to make a large change in your life, from buying a home or a car to having a baby or getting married. It allows you to leave more behind should you die before your debt is paid off. A term life insurance policy that covers you for the life of the debt will allow you to rest assured that if something happens, your loved ones will not be buried by payments on your new car, etc If you are looking for life insurance to cover things like debts and your family after you are gone, then term life insurance is the thing for you.
