Whole and term life insurance are the two main choices people have when they decide it’s time to buy this personal finance tool. Term policies are temporary while whole life policies are permanent. Representatives with an agency such as Insurance Center of Monroe are ready to answer questions. Get more information at the website.
Term and Whole Life Policy Differences
Term Life Insurance Policy in Monroe MI is bought for a specific time frame and has an end date. It does not build up any cash value aside from the amount of the policy. The money is no longer available once the policy ends.
In contrast, a whole life policy is permanent as long as the person pays the premiums long enough to lock in the face value of the policy. This depends on how the payment arrangement was originally set up; it might be 20 years, for example. The policy gradually builds up extra cash value in addition to the policy value, making it an investment. This may sound like a much better deal, but the premiums are significantly higher.
Deciding Between the Options
Term Life Insurance Policy in Monroe MI is usually the best option for someone who cannot afford premiums for the other choice. Many of those policies can be converted to whole life later if that is preferable once the person is better established financially. The term policy also could be canceled at some point and a new whole life policy purchased. In some cases, the person would like to extend the term life policy, but the insurance company doesn’t allow this because the policyholder is too old to qualify.
Uses for Cash Value
The permanent policy’s cash value accumulation might be used for retirement or an inheritance to a beneficiary. Sometimes policyholders choose one adult child as a beneficiary because they are leaving something else of equal value to a different child who particularly wants it, such as a vacation property or a sailboat. Whole life policyholders also are allowed to borrow from the cash value, but they must pay it back or the amount paid to the beneficiaries at the time of death is reduced.
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