Term Life Policy Cash Value – For anyone who has loved ones who depend on them financially, life insurance is a must. Life insurance ensures that your loved ones will continue to be provided for should something happen to you.
But life insurance coverage can take several forms, and the type of plan that’s right for you depends on several factors.
Term Life Policy Cash Value
The two main types of life insurance are term life insurance and whole life insurance. Let’s learn more about these two types of life insurance to get an idea of which one might be right for your needs.
Term Vs Permanent Life Insurance: Which Should You Choose? [infographic]
Both life insurance and whole life insurance provide useful coverage to provide for your loved ones if you die or are no longer able to work.
With a basic life insurance plan, you or your family will receive compensation in the event of death or permanent disability. This payment can be used in any way, and is intended to provide financial support to compensate for the loss. Depending on the life insurance plan you get, you may end up getting coverage for certain situations, including (but not limited to) if you are struck by a terminal illness, critical illness, etc.
Both life insurance and whole life insurance can be tailored in certain ways to meet your needs and budget.
You can adjust your life or life insurance premium to a level you are comfortable with according to your budget.
Two Types Of Life Insurance Policies
The level of coverage you receive and the guaranteed coverage are usually adjustable, and you can have the option to add riders if you want to get full coverage.
Both whole life and whole life insurance usually have a premium period during which you will make fixed payments. Some whole life insurance policies charge a single premium initially, which is ideal for those who don’t want to commit to a long term premium.
Paying premiums throughout the premium period requires a certain level of commitment, so you should choose a premium payment structure that you can afford for the entire premium price.
As the name suggests, whole life insurance is designed to give you coverage for the rest of your life or up to the age of 100, depending on the plan.
Life Insurance Vs. Annuity: What’s The Difference?
Term life insurance, on the other hand, covers you for a specific period of time. You are given the opportunity to choose how long you want to be covered, meaning you have to gauge at what point in your life you no longer need this life insurance.
For example, if you have young children and want to make sure your children’s education will be covered even after you graduate, you may want to get coverage to cover only until your children are old enough to graduate from university. Let’s say you are 30 years old and you think they will graduate when you reach the age of 55. You can then buy a term plan to cover you only for that age.
For whole life insurance, the premium is usually fixed and does not change throughout the payment period. You will pay the same amount every time it is due, during the policy period.
Depending on the individual plan, you can also have a fixed annuity, where you always pay a fixed amount, but for a fixed period, say up to the age of 69, when the cover continues for the rest of your life or up to. 100 years, depending on the system.
Cash Value And Cash Surrender Value Explained
For term life insurance this depends on the specific policy. Some come with premium features too, which means your premium won’t go up. However, if your cover period is a renewable policy, each time you renew the policy, your premium may increase depending on your age at the time of renewal.
For example, if you have to renew your policy every five years, your premium will remain the same for those five years. However, after upgrading, if it increases from your 6th year onwards, because you will be 5 years older than you originally were. And if you renew again in the 11th year, the amount can increase even more.
Another way to compare plans is to look at the cost per dollar of guaranteed income. This is basically taking the amount of premium you will pay divided by the sum insured – the amount of cover you purchased.
Term life insurance usually pays less for every dollar of sum insured. If you’re looking for short-term life cover and are tight on your budget, this can make a term policy attractive.
Term Life Insurance Vs Whole Life Insurance: Which Should You Get?
Whole life insurance typically costs more per dollar than the sum insured. This means premiums tend to be higher, but that’s because whole life can serve other purposes besides providing protection for your life, such as allowing you to build cash value (see the following paragraphs for more on this).
While an end-of-life plan is to provide coverage if you think you need it, a whole life insurance plan can serve many purposes.
Apart from just providing life insurance coverage, they can also enable you to build capital value. This is important because, if you are old and don’t think your dependents need protection against your death or disability, you can choose to leave the plan and receive the cash value. This can serve as a major contributor to your retirement fund, or be passed on to your children if you want to leave them an inheritance (which will also happen when you die).
Finally, cash value whole life insurance comes with the option to convert to a paid-up policy. A paid-up policy is fully paid-up, which means you don’t have to pay any additional premiums. This is usually only done when you have accumulated some money, and is a way to keep the policy active without having to keep paying premiums. Doing this will reduce the death benefit but it may be better to give the plan.
Life Insurance In Your Financial Plan: Part 1
Buying life insurance is an important purchase and requires careful consideration of what best fits your budget, your goals and your family’s needs. Regardless of the plan you choose, life insurance is key to protecting your loved ones from life’s uncertainties. Learn more about how you and your family can stay covered with insurance here.
Important Note: This article is intended for informational purposes only and should not be relied upon as financial advice. The specific terms, conditions and exclusions of any specified product are explained in their policy contract. For advice tailored to your needs, consult an insurance consultant. This ad has not been reviewed by the Monetary Authority of Singapore.
With over 10 years of writing experience, Joanne Poh specializes in insurance, finance, real estate, financial technology and travel. Her work has been featured on Yahoo!, MSN, AsiaOne and herworldPLUS.
Mental illness is on the rise, but help is available. Find out how life insurance can work for you.
Cash Value Life Insurance: Everything To Know
Important for every parent, life insurance can help ensure your child’s happiness is protected, even after you’re gone. The two types of life insurance are term and whole life. Whole life is a type of permanent life insurance that lasts as long as you live (assuming you pay the policy premium). It also includes an accumulated value account – which is a type of savings account that grows tax-free over time and you can withdraw or borrow while you’re alive.
Term insurance, on the other hand, only lasts for a certain number of years (term) and does not increase any cash value. We’ll break down the key features that set this insurance foundation apart.
Term life insurance is probably the easiest to understand because it is straight insurance, with no savings or investment. The reason you buy a term plan is because of the death guarantee for your beneficiary if you die while working. For many, it’s a way to ensure their minor children are provided for and their mortgages are paid after they die.
As the name suggests, this special form of insurance is only good for a certain period of time, be it 5 years, 20 years, or 30 years. After that, the policy expires.
Variable Life Vs. Variable Universal: What’s The Difference?
Because term policies offer upfront and long-term coverage, they are often the cheapest type of life insurance, often in installments. If all you are looking for from life insurance is the ability to protect your family if you die, then term insurance may be the best fit.
Since term policies are often cheaper and can last until your child is an adult, term insurance can be a good option for single parents who want a safety net for their children in the event of their death.
According to quotes collected from more than 30 insurance companies, the average monthly premium for a healthy 42-year-old man applying for 30 years.
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