The Benefits and Drawbacks of Life Assurance

the-benefits-of-term-life-insurance-300x229For a number of individuals, life insurance is a necessary evil.  There are a lot of policyholders who swear by life assurance to safeguard their family members against hefty debt obligations and loss of income when death ultimately occurs.   Many individuals view life assurance as a death benefit that beneficiaries receive after a policyholder dies.  Even though this is so, it is essential to recognize that with some life assurance policies, it is usually not quite that simple.  There are several varieties of life insurance available; however, whole life and term life are the most popular.  Pros and cons are connected to both.

 

Varieties

 

Whole life is essentially policies that use premiums to cover the cost of insurance and a part of those premiums are placed into associated investment vehicles that experience growth over time.  Paid-up insurance, whole life, universal life and variable life are among the most popular whole life insurance products.  All policies in this category have a cash account that grows whenever a premium is paid as well as a death benefit.

 

As it relates to term life, there are some significant differences.  Term life does not include a cash value account.  The cost of cover is paid exclusively with the premiums.  The specific term of the policy is maintained by the premiums and when the term of the policy ends, a new one has to be bought.

 

Benefits

 

There are benefits to be derived from both whole life and term life.  Regarding whole life assurance, its most significant benefit is its capacity to provide coverage throughout the lifetime of the policyholder.  A number of individuals prefer to purchase this type of insurance at a young age, when it is most beneficial.  Additionally, policyholders can draw from or borrow against the policy and there is no requirement for policyholders to pay taxes on any earnings or interest associated with cash accounts.

 

Corporations and individuals derive benefits from term life as well, with the most significant being the typically inexpensive premiums; particularly when an individual is healthy and young.   Term life is also great for covering financial obligations like education costs, automobile loans and mortgages that will eventually end.

 

Warnings

 

There are also a few disadvantages associated with both types of online life insurance policies.  With whole life, the most significant drawback is premium inconsistencies.  Most of these policies require premiums that could increase over time, which can become quite costly for individuals on a budget.

 

A number of disadvantages are associated with term insurance as well, with a major one being the fact that it is not permanent.  Even though the holder of a policy may benefit from extremely inexpensive premiums during their younger years, after a certain period of time, term products will expire or they will expire when the policyholder reaches a particular age.  A new policy must be purchased upon the expiration of an existing policy.  This is an indication that in order for the continuation of coverage to occur, an individual has to meet the qualifications of a new program based on the status of his or her health and current age.

 

This often results in an individual being deemed as uninsurable or very high premium payments.  However, there are some term insurance policies that offer “renewal” and “re-up” options, which may not have a requirement for customers to show proof that they are insurable for coverage to continue.

 

Considerations

 

It is highly recommended that a knowledgeable insurance agent be consulted before purchasing life assurance.  It is essential to go for a product that is specifically tailored to the needs of each policyholder and members of his or her family.  For instance, a person may only require protection for his or her family against hefty mortgage payment for between 10 and15 years.  If a person wants a policy that covers him or her throughout his or her lifetime, then a whole policy could be the best option.

 

Decide if utilizing life insurance policies as a means of investment is a wise move. It could be more profitable to purchase term insurance and benefit from low premiums and instead invest in stocks or mutual funds that are separate from insurance policies.

 

Learn more about the benefits and drawbacks of life assurance by clicking

 

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