I guess my major question is: who buys whole life insurance and why? My view of insurance is that it is money to allow my family to pay off all debts and have money left over to be able to live should I perish. I don’t need life insurance when I am 60 years old (hopefully) because my dependents, should not be dependent any more, just my wife, and hopefully by then I am out of debt and have a nice nest egg and a pension.

Why would people buy whole life then?

Term life insurance guide 101 by Mansi gupta

Out of the various insurances existing in the market today, term life insurance is also one. A part of life insurance policy, term life insurance is deemed to be pure insurance protection as there is no build up of cash value. This feature demarcates between term life insurance that exists for specific period of years such as from 15 to 30 years of age for a particular premium and the other types of life insurance that cover the policy for a lifetime. The most common periods are 10,15,20 and 30 years. In this type, the premium paid every year remains unaltered and it is the cost of each year’s annual renewable term rates averaged over the term, with a value of money adjustment done by the insurer.

If the term life insurance policyholder dies then the benefit goes to his proposed beneficiary. The most simple and common form of term life insurance is for one year. After the expiration of the term the insurer does not need to pay out. If during the one-year term of insurance the insurer dies, the insurance company pays his death benefit to the beneficiary. But not even a single penny is paid if the policyholder dies even one day after the expiration of the term.

Due to low interest rates, term life insurance is quite popular. Term life insurance is preferred where premium buys protection only in the event of death. There are three primary concerns while purchasing a term life insurance: face amount or protection, premium to be paid i.e. the cost to the insured and the length of he coverage i.e. the term pr the time period.

There are different types of term life insurance. First is the Level Term insurance where the insurer is supposed to pay a fixed amount of premium for upto 20 years. Second is the Annual renewable term insurance that provides you with an option of renewing your policy regularly but at increasing premium rates. It is one of the simplest forms of policy with a term period of one year and is quite cost-effective too. The third kind is Decreasing Term where you can encounter a gradually diminishing death benefit. It can be beneficial for the insurer and his family when he retires from the job.

Term life insurance is the first choice of doctors, engineers and other professionals. For instance doctors who wish to set up their own clinics and do not incur good funds in first few years, prefer to take term life insurance policy. Since term life insurance can be purchased in large amounts for a significantly small initial premium, it is becoming all the more viable option. Moreover term life insurance is one of the most affordable ways to purchase a death benefit on coverage per premium per dollar basis.

However if you are willing to buy a term life insurance for a long-term risk, there are several points to be borne in mind. To begin with, if you already have a whole life policy then a term life insurance can meet your mortgage payments so that your family is not pressurized by the mortgage after you die. Also remember that in the annual renewable policy the insurance company might not renew the policy if your health starts to decline. This can be avoided by opting for a guaranteed renewable policy. But the premiums of this guaranteed policy will increase each time you renew the policy. You can also go for convertible term insurance where you convert the policy to permanent coverage.

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Mansi gupta recommends that you visit Term life insurance for more information.