What To Choose: A Whole Life Or A Term Insurance PolicyProblem: I am a 27 year old person who has recently joined a new job and earning decent salary. Moreover, recently I got married. Now, I am thinking seriously about purchasing a good life insurance policy. Can you tell me which policy would be best for me, term life insurance or a whole life insurance?
Solution: First of all, thanks a lot for seeking my views in this regard. It is indeed a good thing that you are thinking seriously to purchase a life insurance policy. And, you are absolutely right that mainly there are two broad types of life insurance policies - whole life insurance and the term life insurance. Here I am discussing the pros and cons of these three types of policies so that you can opt the best life insurance.
Whole life insurance policy
This is permanent life insurance policy. Its life time validity remains as long as you pay the premiums. With whole life insurance policy in place, you can be rest assured that you will leave behind something for your successors. The whole life insurance policies are like forced savings. It builds up a lump sum savings account that you can use only after you retire. However, if you are not very disciplined financially, you should think twice before purchasing whole life insurance policy as you have to pay premiums for a long period of time. Moreover, the whole life insurance policies are regarded as wonderful real-estate planning tool. Though the real estate bears a heavy burden of taxes, the death benefit associated with whole life insurance policies is completely tax free.
One major drawback of whole life insurance policy is that it is very expensive. Not all of you can afford to pay the high premiums of whole life insurance policy so as to obtain good life coverage. Another problem associated with whole life insurance policy is that it has been seen quite often that many of you manage this policy quite well in the initial years but thereafter falter. Moreover, administrative fees and other fees associated with whole life insurance policies comparatively higher than other investment avenues.
Term life insurance policy
The term life insurance policy meets temporary needs of you. The most important feature of these policies is its affordability. A large variety of term insurance policies are available at the market place and it is very easy to purchase a term life insurance policy. However, to find out the best term life insurance policy, you are first required to figure out your requirements, compare the different quotes, and finally pick the best life insurance.
The most serious drawback of this insurance policy is that, it expires after a certain period of time. If at the end of the term, you feel that you still need life coverage, then you have to again start from the scratch. Moreover, as you grow older, the premium amount also increases.
So, here I have discussed the pros and cons of term life insurance and whole life insurance policies with some details. Now, depending upon your future goals and of course your financial situation, you decide upon which type to choose.
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