James Smith
New Member
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Whats the difference between regular life insurance and term? How does term work?
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Whats the difference between regular life insurance and term? How does term work?
[FONT=Geneva, Arial, Helvetica, sans-serif]Term Life[/FONT]
Term life is temporary insurance usually sold in 5, 10, 15 or 20 year plans. This is an inexpensive way to protect against any number of financial risks.
Good use of Term Insurance includes:
• There is a temporary need for protection, such as for a mortgage or student loan.
• Limited funds are available or lower cost protection makes sense.
• There is a need to cover outstanding loans for business owners or other personal debts that you do not want to burden others with unexpectedly.
[FONT=Geneva, Arial, Helvetica, sans-serif]Whole Life[/FONT]
Whole life is permanent insurance. Not only does it provide the protection of term life with regards to death benefit, whole life also provides the policy holder a tax advantaged cash value. Cash value is built and paid by the insurance company in the form of dividends based on the insurance companies performance. The cash value built up in the policy is yours and available to borrow against or withdraw completely if the need were to arise.
Good use of Whole Life includes:
• You need lifetime protection for your family or a business
• You want to accumulate cash value for use during your lifetime.
• You have unique needs - the policy can be customized in many ways.
• You need traditional insurance protection, mortgage protection, supplemental retirement funding, supplemental education funding, or other cash value needs.
It's arguable that any cash value that is accumulated is a dividend, paid as a return of excess premium paid, however not necessarily based on company performance. Why would someone buy a whole life policy from an insurance company that doesn't pay a dividend based on company performance, ie. mutual insurance company. You might as well just by term and put the rest in a savings account.