Life insurance quote comparisons are important to understand, as different types of life insurance each have benefits and shortfalls.
Three main types of life insurance policies are available: term, whole, and universal. Each type has strengths and weaknesses, and the type one chooses is due to many different factors. The insurance policy which may work best for one individual may not be the best choice for another. When determining life insurance quotes, it is especially important to remember which type of policy the quote is for. Price is only one factor to consider. Read also: How to Find Instant Life Insurance Quotes?
Life insurance rates vary. For example, typically a man will pay more for his premium than a woman would. A smoker would pay more than a non-smoker. Age is an important factor in determining rates for life insurance quotes, as the older the insured, the more he or she will pay for life insurance, regardless of the specific type of policy applied.
Term Life Insurance Quotes
Term life insurance quotes are usually the cheapest of the three because the policy is good for a certain amount of time. Once the time is up, if the insured is still alive, the policy will expire unless the individual chooses to pay a typically higher premium for the same amount of insurance. Terms vary depending upon the specific policy, but common terms include 10, 15, 20, and 30 years. The insured pays a fixed amount every month for the entirety of the term.
The pay-out of term life insurance is to be used by the beneficiary at the time of death of the insured. There is no cash-value associated with term life insurance as there is with whole life insurance. The beneficiary may use the money paid out to cover costs such as expenses associated with the death and funeral, to pay outstanding debts of the deceased, and to be used as income replacement of the deceased.
While term life insurance quotes are much cheaper than permanent life insurance quotes, it should be noted that the likelihood of a relatively healthy, average individual dying within the time frame of the term life insurance policy is very little, with some studies indicating the chance of death around one percent. Read also: Life Insurance Options for Diabetics.
Whole Life Insurance Quotes
When comparing term life insurance quotes to those of whole life insurance, a big difference in premium payment can be observed. This is due to the fact that whole life insurance is typically guaranteed to pay out the death benefit upon the death of the insured or at a predetermined time, such as age 95. Whole life insurance also carries a cash value which term life insurance does not accumulate. The cash value may be withdrawn before the death benefit is paid out under predetermined conditions in the life insurance contract.
Many different types of whole life insurance exist, but all are basically the same. The prudent life insurance purchaser will be sure to read all the points in the contract to know exactly what he or she is getting. Typically premiums are paid throughout the life of the policy, but there are exceptions to this depending upon the specific type of whole life insurance purchased.
Some personal finance experts advocate purchasing term life insurance and investing the difference instead of purchasing whole life insurance. Reasons for using this method include more options for investing, more stability in the death benefit, and the ability to not have to carry insurance. When investing in a whole life insurance policy, the investments made to the cash value portion of the policy are not usually chosen by the insured and are instead chosen by the life insurance company. Someone who does well with investments may choose to invest the money himself or herself in a tax-deferred or tax-free account such as an IRA.
If the cash value portion of the whole life insurance policy is used before the death benefit is paid out, a lesser death benefit will be available. Term life insurance guarantees a set death benefit with no cash-value portion to the contract. Those who invest wisely their entire lives may eventually find themselves without a need for life insurance due to very good investment strategies. The investments, then, upon death, become a type of life insurance for survivors. Read also: A Step-By-Step Guide for Buying Life Insurance.
Universal Life Insurance Quotes
Universal life insurance quotes generally fall between those of whole or term life insurance. This type of policy carries a cash value. This cash value is applied, with interest, every month when the premium is paid. Money is withdrawn from the cash value to cover the cost of insurance and other policy fees. Benefits to this type of life insurance include the ability to raise or lower the death benefit at the insured's discretion. Premium payments can also be raised or lowered as long as they are within predetermined parameters within the contract.
The main downside to a universal life insurance policy is that the policy lapses when the premium payments do not cover the cost of insurance and administrative fees. This causes the universal life insurance policy to act similar to a term life insurance policy. To combat this trend, many life insurance companies have included guarantees so that the policy is guaranteed not to lapse for a set amount of time so long as premium payments are being made.
Whichever life insurance policy is chosen, it is important to remember that life insurance quotes will almost always be cheaper for policies which require a physical exam, provided the insured is healthy. This is because policies which do not include a physical exam assume the insured is not healthy. Universal, whole, and term life insurance quotes can vary widely, so it's best to shop around before deciding on once policy or company.