Life insurance is one of the best ways to secure your future and the future of your family. The rising popularity of life insurance as an investment choice shows that people are becoming more aware of the benefits of investing in a policy. In case of a person’s death, a life insurance policy can ensure that their dependants’ financial security is taken care of.
The assurance of financial support for your family is only one of the reasons that you should consider signing up for life insurance, if you haven’t already. Other than that, it also works as a wealth generation method, where interest and returns keep accumulating above the amount of the premium you are paying.
So, as a mode to ensure your family’s security, as well as an investment or retirement plan, you will end up making a choice between the two major kinds of life insurance policies. These are term life policy and whole life policy. A lot of people choose term life insurance policies without understanding the difference between the choices they have.
Whole Life Insurance – Let’s Clear Up the Myths!
As the name implies, a policy that offers an insurance cover for the complete lifetime of the individual is termed whole life policy. There are a number of misconceptions about this kind and we are going to discuss three of the major ones here:
- It’s Expensive – While the amount of the premium for term insurance may seem lower to begin with, remember that it changes every time it is renewed. Most of the time, due to increasing age, health problems, inflation and other factors, the premium is likely to start going up every time your policy is renewed. With a whole life policy, the original premium that is decided remains the same throughout your life, so it actually works out much less expensive in the long run!
- Payouts are Low – When you sign up for an insurance policy that is for your whole lifetime, you avail the benefits of earning revenue from your investment as well as the death benefit that your family will receive in case you lose your life. These tend to accumulate over time, so you can keep reinvesting them while retaining the original premium amount that is unaffected by inflation or other factors, or even take a loan against the cash value.
- It’s Inflexible – This kind of policy stays in effect as long as the original premium amount is being paid on time. The fact is that you can always start with a term insurance policy and then convert it to a whole life policy after a few years, whenever you feel you can afford the premiums. You may even be able to continue at the premium set by your term insurance, so the flexibility is really quite high!
The normal impression that people have of whole life insurance policies being heavy on the pocket is an incorrect one. Especially if you start at a young age, you can find that this is one of the most sensible decisions you have ever taken, for yourself as well as your family.