It is vital to grasp the distinction between whole verse life insurance before you begin to shop.
Whole life (also known as permanent) policies are insurance policies that accrue cash price over time and usually pay dividends. Buying a whole life policy is an investment. As the named insured, you have the flexibility to draw against the money value. Whole policies are more flexible and more expensive than term policies.
Term life polices are more cost-effective and inflexible. Term policies are bought for a designated period of time. If the named insured dies before the policy expires, the benefits are paid. But, if the policy expires before the death of the insured, there are no return premiums. Because the insured you’ve got the option to renew the policy for another specified period of your time, or let it expire.
The distinction between whole life and term policies is almost like the difference in buying verses renting a house. An entire policy would be like buying a house. The acquisition of a house is an investment. Typically the house appreciates in value. You can borrow against the growing equity within the house. When you choose to move, you sell the house and reap the monetary rewards of the investment.
Renting, on the other hand, is sort of a term policy. You rent an apartment or house for a selected amount of time (lease). You are doing not have the choice to borrow against the equity. When the lease is up, you either renew the lease, or move. If you select to move, you do not get some of the rent back.
Term policies do, however, permit you to upgrade to a permanent policy while not the need for a physical exam (just like renting a house with the option to shop for). A change in your money condition may permit you to afford a whole policy that was out of your money reach some years earlier.
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