Term Life Insurance vs. Whole Life
Although whole life insurance is rarely provided by Australian insurance providers, the information regarding the differences of these two types of insurance might still benefit you. After all, you’ve got nothing to lose if you know why most people opt to go for term life than whole life. How about you? Are you leaning towards getting term life, too? Hold on to that thought until you’ve read this article to help you choose the best way to go about insuring your life.
Some experts say that if you are less than 40 years old and don’t have medical history for life-threatening disease, you should go for term life. But if you want something that offers cash value over time, then choose whole life. There’s really a tight difference between the two, so let’s start by defining each. Term life insurance is basically a type of insurance that pays the face amount of the policy to the named beneficiary when the insured dies during the term indicated in the policy. Whole life, on the other hand, remains in force for your entire life, and it has an investment component.
Now, let’s talk about the cost. If you ask policyholders why they chose term life, their answer would be because term life is cheaper than whole life. Well, that’s true since in whole life, the policyholder pays not only for insurance but also for the investment portion. Although that extra cost might almost be worth it if you’re thinking about having an additional investment, but if you look at the high premiums that you need to pay for the policy, you might think twice about getting it.
Yes, there may be downside in getting whole life, but there’s always something good in choosing this. Unlike in term life, here a portion of your premiums goes toward your cash value which in turn could pay off your entire policy only after a few years. Also, here your premiums remain constant, as compared to term life where premiums go up when the policyholder turns over the age of 50. Whole life is also a good choice because of tax savings, plus you can borrow from your policy if you’re in need of cash.