Understanding Whole and Term Life Insurance

When faced with the task of purchasing life insurance policies many people will struggle to decide between whole and term life policies.  Rising Star Insurance can help people in the Saint Paul, MN area to better understand the basics of each type of policy and can help you make the right decision for you and your intended beneficiary.  The biggest difference to keep in mind is that whole life insurance policies cover you for your entire life whether you live to be 40 or 115; while term life insurance policies only cover you for the term of the policy which can range from one year to twenty.  

Whole life policies were created to balance out problems with term life insurance.  These policies last the insured person’s entire life.  Whole life policy premiums don’t increase during the life of the insured.  This means that premiums, the amount of money you pay each month to keep the policy in effect, will be higher than a term life policy when you first start to pay on it. The extra premium money becomes the cash value for the policy.  The insured can borrow this money or withdraw it early.  Of course, you must repay the loan and continue to make premium payments as well.  Your beneficiary will not pay tax on the death benefit money when they receive it.  However, the beneficiary is only paid the amount of the policy.  They will not receive any cash value money there may be.  

Term life insurance policies only stay in effect for the term the policy is purchased. These amounts of time may range from one year to around twenty years. If the insured dies within the term of the policy then their beneficiary will receive a tax-free cash payout. Most insurance companies require that the potential policyholder be examined by a doctor to make sure they do not have any serious health problems.  This is usually only required for the initial purchase of the policy and not necessary when the policy is renewed.  Premiums often increase every time the policy is renewed and as the policyholder ages.  The death benefit does not increase, however, unless the policy is changed.  The higher the death benefit the higher the premiums usually.

Understanding the basic differences between whole and term life insurance policies will help you decide which is best for you and your beneficiary.  In the Saint Paul, MN area please visit the website for Rising Star Insurance to begin your search for the right life insurance.