Life insurance can be categorized as either “whole life insurance” or “term life insurance“. Essentially, the difference is that whole life insurance is designed to provide coverage for the duration of policyholder’s life while term life insurance provides life for a specified period of the policyholder’s life.

Whole life insurance policies remain in place as long as the premiums are paid, or until the covered person reaches the age of 100 years. These types of policy begin to build up a cash value that increases as long as they exist, starting usually after the first year the policy is paid for.

For a whole life policy, the premium remains the same cost (in contrast to renewable policies where the price can change). The cash value of the policy is also guaranteed, therefore making it safer, but these policies require the whole of the premium to be paid in order to keep them active.

Given the steady, predictable payments and payout, whole life is an excellent option for most people thinking about the long term future. Besides being more or less permanent, it also enables you to build up cash value free of taxation. If you decide you don’t like your policy after all, there’s no worries. You can cancel it at any time, and get the value of the insurance in cash.

If you’re lucky, some whole life policies can even result in more money value than the amount promised. This is a result of changes in the market and rates of interest credit. For instance, these policies can change in value depending on the performance of the policy’s company. The difference between whole life and variable life policies is the lack of a guarantee of value. You can borrow against the value of your whole life policy, temporarily ‘cashing it in,’ as a loan. The value of whole life policies ideally compete fairly with other similar investments in fixed revenue.

A useful and profitable facet of being a whole life policy owner is the chance to acquire dividends. Insurance companies determines the earnings for their policies on a basis of the overall return they can get on their investments. Also, whole life insurance benefits from having its interest adjusted only on a yearly basis, whereas other kinds of insurance policies, such as universal life insurance, are frequently adjusted on a month to month basis, making them harder to keep up with and calculate their worth versus cost. As with all forms of insurance, whole life insurance benefits from a great many different options in policy.

Now, as a final caution… this may seem silly, but don’t buy whole life insurance unless you can afford to pay it off for your whole life! Buying a long term policy and then letting it expire is a complete waste of everyone’s time and money. Since life insurance prices are best in your youth, try to buy the policies you want to hold out through your lifetime when you’re young. If you can’t afford whole life insurance right away, you should at least get term to tide you over until you can afford whole. The premiums involved in whole life insurance policies may seem steep, but they’re high because they are a one hundred percent promise of paying out in the end if you don’t let it expire. You can never decrease your payments with whole life, but it’s worth it for the unmatchable sense of security it provides.

Susan Reynolds is the webmaster for a leading South African Life Insurance provider. For more information visit: http://life.insurance123.co.za/

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