Q: I've been receiving proposals for years from insurance agents and only started looking at them closely. I noticed that one offer for a term insurance is much cheaper. I hesitate to call the agent as my query may be seen as strong interest to buy. Can you help me? Should I take term insurance because of the cost?
A: Life insurance is one of those things you need to have to protect your family in the future. “The main reason to purchase life insurance is to protect you and the people who rely on you (your dependents) against disaster,” wrote the authors of The Citibank Guide to Building Personal Wealth. “The most obvious problem is if you die before old age. If this happens, your dependents are likely to be in financial trouble, but adequate life insurance would pay out a lump sum of money to ease their distress.”
Today there are many life insurance products being offered that it may seem a bit confusing to distinguish one from another. Basically, there are just two types (whole and term), but they come in various kinds with different features and benefits.
• Whole life insurance pays out benefits to the beneficiaries upon the insured's death, whenever it may be. It gives you insurance coverage for the duration of your whole life, thus the term. Premiums may be paid for life, or for a limited number of years. It may be participating or nonparticipating—participating means you get a share in the profits of the company, and this amounts to dividends. Whole life insurance has a cash value, and policy owners may avail of policy loans.
Some whole life insurance policies are termed variable universal life insurance, which allows policyholders to determine where premiums will be invested and have a share in the gains of that investment. Others are endowment policies which give you or your beneficiaries added cash benefits at a certain time in the future. Still other kinds of whole life insurance merge the benefits of health insurance in the package. You can look at all these as forced savings and investments.
• Term life insurance is also referred to as “pure” life insurance. It offers insurance coverage for a fixed term, say 10 or 25 years. According to The Citibank Guide to Building Personal Wealth, “There is no savings element or any guaranteed payout unless you die while you are covered.” This means that if your term life insurance is for 25 years, your beneficiaries won't get anything if you die on the 26th year, unless you have renewed your insurance. “This makes term insurance much cheaper than other varieties, and for most people it is a good option to choose, provided that you appreciate that the premiums you pay are for insurance only—there is no investment element.”
Term insurance comes in many kinds, as written in The Citibank Guide to Building Personal Wealth. In “level term insurance,” the payout sum does not change throughout the term. In “decreasing term insurance,” the payout sum decreases over the term. “Increasing term insurance” is its exact opposite, where the payout sum increases over the term to guard against inflation. “Convertible term insurance” makes it possible for the policyholder to convert the policy from term to whole life at any time, regardless of health conditions. “Renewable term” allows the policyholder to renew the policy at the end of the term without regard for his or her state of health.
Now which is better? Term insurance is indeed cheaper, but there are not much benefits as compared to whole life insurance. However, if you already have or are planning to have health insurance and a separate investment plan designed to meet your financial goals, you may not need the added benefits of whole life insurance. Premiums for whole life insurance can be expensive, so if money is tight, get term insurance instead.
Over time though, insurance gets more expensive as the prospective policyholder advances in age. And sometimes it may get harder to have one's life insurance policy application approved as one gets older due to poor health. It would be wise to get life insurance as soon as you start a family or have other family members dependent on you.
There are three key principles to follow when considering buying life insurance coverage, according to The Citibank Guide to Building Personal Wealth:
1. Insure against important risks. The book says, “The money you spend on life insurance should go to ensuring that you have adequate protection against these kinds of major risk” – your early death, major medical bills, and a serious disability. By insuring against these, your family will be better equipped to handle the financial responsibility in those instances.
2. Compare prices. “The cheapest cover is not necessarily the best: you must make sure that the insurance company is financially sound and has a good reputation for making prompt payments on legitimate claims.” Shop around.
3. Purchase broad coverage. Get a policy that insures against more than just a few serious diseases or types of accidental death. “For the major risks, buy insurance that covers as wide a number of scenarios as possible.”
Source: Inquirer.net
A: Life insurance is one of those things you need to have to protect your family in the future. “The main reason to purchase life insurance is to protect you and the people who rely on you (your dependents) against disaster,” wrote the authors of The Citibank Guide to Building Personal Wealth. “The most obvious problem is if you die before old age. If this happens, your dependents are likely to be in financial trouble, but adequate life insurance would pay out a lump sum of money to ease their distress.”
Today there are many life insurance products being offered that it may seem a bit confusing to distinguish one from another. Basically, there are just two types (whole and term), but they come in various kinds with different features and benefits.
• Whole life insurance pays out benefits to the beneficiaries upon the insured's death, whenever it may be. It gives you insurance coverage for the duration of your whole life, thus the term. Premiums may be paid for life, or for a limited number of years. It may be participating or nonparticipating—participating means you get a share in the profits of the company, and this amounts to dividends. Whole life insurance has a cash value, and policy owners may avail of policy loans.
Some whole life insurance policies are termed variable universal life insurance, which allows policyholders to determine where premiums will be invested and have a share in the gains of that investment. Others are endowment policies which give you or your beneficiaries added cash benefits at a certain time in the future. Still other kinds of whole life insurance merge the benefits of health insurance in the package. You can look at all these as forced savings and investments.
• Term life insurance is also referred to as “pure” life insurance. It offers insurance coverage for a fixed term, say 10 or 25 years. According to The Citibank Guide to Building Personal Wealth, “There is no savings element or any guaranteed payout unless you die while you are covered.” This means that if your term life insurance is for 25 years, your beneficiaries won't get anything if you die on the 26th year, unless you have renewed your insurance. “This makes term insurance much cheaper than other varieties, and for most people it is a good option to choose, provided that you appreciate that the premiums you pay are for insurance only—there is no investment element.”
Term insurance comes in many kinds, as written in The Citibank Guide to Building Personal Wealth. In “level term insurance,” the payout sum does not change throughout the term. In “decreasing term insurance,” the payout sum decreases over the term. “Increasing term insurance” is its exact opposite, where the payout sum increases over the term to guard against inflation. “Convertible term insurance” makes it possible for the policyholder to convert the policy from term to whole life at any time, regardless of health conditions. “Renewable term” allows the policyholder to renew the policy at the end of the term without regard for his or her state of health.
Now which is better? Term insurance is indeed cheaper, but there are not much benefits as compared to whole life insurance. However, if you already have or are planning to have health insurance and a separate investment plan designed to meet your financial goals, you may not need the added benefits of whole life insurance. Premiums for whole life insurance can be expensive, so if money is tight, get term insurance instead.
Over time though, insurance gets more expensive as the prospective policyholder advances in age. And sometimes it may get harder to have one's life insurance policy application approved as one gets older due to poor health. It would be wise to get life insurance as soon as you start a family or have other family members dependent on you.
There are three key principles to follow when considering buying life insurance coverage, according to The Citibank Guide to Building Personal Wealth:
1. Insure against important risks. The book says, “The money you spend on life insurance should go to ensuring that you have adequate protection against these kinds of major risk” – your early death, major medical bills, and a serious disability. By insuring against these, your family will be better equipped to handle the financial responsibility in those instances.
2. Compare prices. “The cheapest cover is not necessarily the best: you must make sure that the insurance company is financially sound and has a good reputation for making prompt payments on legitimate claims.” Shop around.
3. Purchase broad coverage. Get a policy that insures against more than just a few serious diseases or types of accidental death. “For the major risks, buy insurance that covers as wide a number of scenarios as possible.”
Source: Inquirer.net
Very informative and useful read, it clarifies the difference between different kinds of insurance and their pros and cons. It will help you to choose the best insurance according to your need.
ReplyDeleteRegards,
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Short term health insurance is also handy during job changes when a new employer’s coverage will not start as soon as the previous coverage ends. However it is not a permanent insurance option, but can be a great asset during certain times of a person’s life.
ReplyDeleteThanks,
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