Given the choice term insurance or whole of life what's better?

Trying to find the right life insurance policy for you can be very difficult. This is due mainly to the fact that you have to consider your personal circumstances and how they affect the choice of plan you ultimately go for. One person might need cover for the whole of their lives and someone else may only need cover for a set term. In this article I intend to point out the main differences between whole life assurance and term insurance and consequently which one might suit your particular circumstances.

The main difference between level term insurance and a whole of life insurance plan is basically simple: Term insurance offers life protection only. Term insurance does not generate any cash within the plan as an investment. All that happens is should the life or lives assured die during the term of the plan then it will pay out the sum assured to the estate.

Whole life insurance works differently. Whole life combines the life coverage and death benefit of term insurance but also provides a vehicle for investing. Over the years the whole life policy is held the investment builds a cash value. The decision regarding which policy is better requires taking a closer look at each type of insurance and the needs of the person seeking coverage.

Typically, a whole life policy is more expensive than a term policy. This is due to the investment element of whole life that is funded during the years the policy is held. Term insurance, without the investment component carries a low premium.

Many people prefer term insurance because of the low premiums. They only need a simple policy that pays a death benefit if they pass away. Further, many believe that investing the amount of money saved through lower premiums, they can outperform any investment vehicle offered by a whole life policy.

Even though a lot of financial advisors would still rather recommend the whole of life insurance plans, they do appreciate that building up a fund value within the plan and the resulting higher premiums that task creates is not necessarily beneficial to all clients. This is due in no small part to the fact that most people have differing insurance requirements to that of others.

People who find themselves in position of great wealth with a complex need for estate planning in order to protect their assets, may find that a whole of life insurance contract that builds a cash value, may be of great benefit to them. In addition business people looking to ensure that their families are taken care of should they pass away may also find that this type of cover very effective indeed.

However if a parent just wants to protect their family in case they die level term insurance can be hard to beat with low premiums. When you factor the lower premiums versus those of the whole life insurance it does make it much more affordable. As has been said before in this article you can always invest any excess savings into an additional savings plan to produce a return.

In summary the right type of insurance for you is very much dictated by your own personal needs and circumstances and those of your family and dependents. Whole life cover is a great solution for some but level term can be a lot better for others. Making the appropriate choice needs a lot of consideration especially taking your own circumstances into play.