Reasons to Switch to a Whole Life Insurance Policy from a Term Life Policy
Many people make the assumption that all life insurance types are the same. They know that if they die with an active insurance policy, then that policy will pay out. This is true; both whole life and term life insurance will pay out if the insured party passes away during the lifetime of the loan. Since both types pay out, why would anyone want to switch from a term policy to a whole life policy? This question will be addressed in this article.
The key word to remember for term life insurance is term. These policies are only active for a limited time, called the term. The term can range from 1 year to 30 years, but once that term is over the policy has to be renewed or the policy becomes void. If you are looking for coverage while you complete some family goals, term life insurance can be wonderful. Term life insurance policies come up lacking when they are considered as actual life insurance.
Whole life is active for your entire life, as long as you stay current on your payments. Some additional benefits of whole life insurance policies are:
- Premiums can be reduced over the course of time.
- A maximum payment can be reached, after this payment there are no further premiums.
Conversely, here are some drawbacks to term life insurance policies:
- Policies must be renewed every time they expire.
- Premiums rise whenever a policy is renewed. Your insurance company knows that you are older every time a renewal comes up and are therefore less likely to live out the remainder of the policy.
You can also cash in on a whole life insurance policy, since it has an associated real cash value. If hard times come around you can borrow against the value of whole life policies. This can be simpler than going through all the motions of getting a loan and cause less stress. The money is available and you will likely pay lower interest rates for borrowing against the policy. It is always best to avoid canceling your whole life policy, but if you should need to, you do have that option.
Think short term solution when you go with term life insurance. To meet family obligations when your children are younger, to ensure that they can have college paid for, if you should pass away is a good use of term life insurance. For long term protection you should consider a whole life insurance policy. A whole life policy is going to offer the financial security your family needs, no matter when your death may occur versus a term life policy that is only valid for a certain amount of time. Be sure to remember these basic facts when buying insurance.