Selecting an insurance policy is always an important decision that should be taken only after considerable thought and planning, as the implications are long-term and generally irreversible. Your insurance cover is the commander of your future fortress, being the most vital cushion of comfort for your family after you are gone. A prudent way to go about selecting an insurance policy is to compare the pros and cons available of the different types and then choose the one that best suits your needs. To help, let us take a look at the intricacies of the two most popular types of insurance options – term and permanent life.
Term Life Insurance
This type of insurance provides security for a specific duration, and if the policyholder dies within the stipulated period, the beneficiaries receive the face value of the policy tax-free. However, in case the policy holder outlives this timeframe, then another policy must be bought in order to continue the insurance. Some key aspects of term life insurance:
• Provides no other benefit besides protection, as the holder pays only for the insurance and no cash value is generation. This is the reason why premiums of term life insurance policies are usually lower than the premiums of permanent life insurance policies.
• The only return in this case is the Return-On-Premiums (ROP), which is the sum total of all the premiums paid by policy holders at end of the term.
• It is a suitable option for those with short-term requirements. E.g. School and college expenses for children, holiday planning etc.
Permanent Life Insurance
Although permanent life insurance policies cost more, they have certain characteristics that give them an edge over term life insurance; for instance, death benefits and an accrued cash value. Another important differentiator is the fact that premiums for permanent life remain almost constant over the years, while for term they keep on gradually increasing as the end of the stipulated period approaches near. Other key aspects to know:
• It is essential to keep the permanent policy alive for a long period of time as longer the policy is in force, higher is the amount invested in it, and even greater is the amount of dividend and interest earned by that amount.
• The amount that gets accumulated in the investment account as cash value is also tax-deferred, which enables the holder to withdraw or take loans against it to meet contingencies without having to worry about the dreaded government scissors on their pockets.
• Permanent life insurance policies suit those individuals who do not have any significant short-term debt that can hamper their ability to pay premiums and have long-term debts to acknowledge, for example, estate duties and taxes, and they do not want their beneficiaries to be worried about it in their absence.
Hope this read clears some of your doubts about term and permanent life insurance policies, and helps you to select a suitable policy as per your requirements.
Get fast life insurance quote online from below given websites to protect the people you love. Customize your policy with options that best meet your needs:
Universal Life Hong Kong & China: http://universallife.com.hk/
Universal Life Indonesia: http://universallife.co.id/