Term life insurance policies provide temporary insurance protection for a specified period of time, also called the policy term (for example, the term may be 1 year, 5 years, 10 years, 30 years, or to a specified age, such as age 65). They pay a death benefit (or mature) only if the insured dies during the term of coverage, and they do not accumulate cash value. Term insurance provides pure protection and is the least expensive form of life insurance.
Term insurance has a variety of useful applications. One of the most common uses for term is to provide a substantial amount of coverage at a minimum cost. Since term insurance provides pure protection, it allows a person with a limited income to purchase more coverage than might otherwise be affordable. This is particularly important when there is a clear need for additional protection
Term insurance has a variety of useful applications. One of the most common uses for term is to provide a substantial amount of coverage at a minimum cost. Since term insurance provides pure protection, it allows a person with a limited income to purchase more coverage than might otherwise be affordable. This is particularly important when there is a clear need for additional protection
Whole life insurance gets its name from the fact that the policy is designed to provide coverage for the whole of life. Whole life is also called permanent insurance because the maturity date is beyond the life expectancy of most individuals. However, a whole life policy actually consists of a combination of a savings element (the advancing cash value) and a decreasing amount of net insurance. When a whole life policy reaches its maturity date (age 100), the cash value would equal the face amount. Because whole life policies include cash values in addition to net insurance protection, the premiums have to cover mortality costs, expenses, and the savings account. For this reason, whole life policies are more expensive than term life policies.
The principal advantage of whole life is that it is permanent insurance and can be used to satisfy permanent needs such as the cost of death, dying, and final burial expenses. The level premium allows the policyowner to know exactly what the cost of insurance will be and offers a form of forced savings. Whole life builds a living benefit through its guaranteed cash value, which enables the policyowner to use some of this cash for emergencies, as a supplemental source of retirement income, and for other living needs.
The principal advantage of whole life is that it is permanent insurance and can be used to satisfy permanent needs such as the cost of death, dying, and final burial expenses. The level premium allows the policyowner to know exactly what the cost of insurance will be and offers a form of forced savings. Whole life builds a living benefit through its guaranteed cash value, which enables the policyowner to use some of this cash for emergencies, as a supplemental source of retirement income, and for other living needs.
Single premium whole life policy is simply a whole life policy with one premium payment (a lump sum amount which, together with the interest it will earn, will be sufficient to cover all future premium payments). The entire cost of this policy is paid up at the time of purchase. Single premium whole life policies accumulate immediate cash value. The premium for such a policy might be many thousands of dollars.
The advantage offered by a single premium policy is that the policyowner will pay less for the policy than if the premiums were stretched over several years.
The advantage offered by a single premium policy is that the policyowner will pay less for the policy than if the premiums were stretched over several years.