Policy Information
Your family obligations, personal finances and other financial obligations such as debt, mortgage or college expenses dictate the amount of life insurance you may need.
There are so many options available that the sheer number of choices may cause anyone purchasing life insurance for the first time to feel confused and overwhelmed. Some questions you may ask are:
- Do I really need a life insurance policy?
- Should I buy term life insurance or whole life insurance?
- How much life insurance coverage do I need?
The pros and cons of whole life insurance and term life insurance are often the subject of debate. The choice for you will be based on your financial requirements and your budget.
The Pros and Cons of Whole Life Insurance
A Miami whole life insurance policy covers your entire lifetime and the death benefit and the premium usually remain the same through the years. This traditional type of insurance adds a cash value component to the death benefit of term life insurance and the only downside is that premiums are higher for a whole life policy.
Investment of your premium by the insurance company allows whole life insurance to build cash value. Perhaps the biggest advantage of whole life insurance is the policy remains in effect even after all of the premiums have been paid. There is no need to renew or submit to additional medical exams or qualify in any way once you have been approved for the original policy.
An explanation of how the cash value component works:
- A portion of the income derived by the insurer from investment of your premiums is returned to you as a cash value.
- The premium investments are chosen by the insurance company and you have no say in what investments may be made.
- There are tax benefits associated with the cash value of whole life insurance policies
- With sufficient cash value built up you may borrow against that value until you withdraw the life insurance policy
You can choose from three types of whole life insurance:
- Traditional - You are guaranteed to build cash value to at least a minimum sum
- Interest-sensitive - Cash value is based on a variable interest rate. This had both pros and cons. In a rapidly growing economy, it is possible the death benefit may increase but a depressed economy may result in less cash return on your policy
- Single-premium – For those in high income brackets, a single-premium whole life policy provides for payment in one lump sum. Returns in the form of cash value are tax deferred as they are with other whole life plans but in this plan the prepayment guarantees a cash return on the policy.
The Pros and Cons of Term life Insurance
Miami term life insurance provides a death benefit but has no provision for building cash value. Yet term life is often recommended to provide low cost protection for beneficiaries should the policy holder die.
How term life insurance works:
- The policy is limited to a clearly defined span of time (the term). This time period may be anywhere from 1 to 30 years or anywhere in between.
- The premium must be paid throughout the term and premiums vary depending on the policy holder’s health and age as well as other factors. Term life costs are lowest for young, healthy buyers.
- Should the policy holder die while the term life insurance is in effect, the insurer will pay a death benefit
For college students, young singles and newly married couples, term life insurance provides excellent death benefit coverage at very reasonable costs.
If you are 40 plus years of age and can afford the higher premiums of whole life insurance you will have insurance for life as well as the potential of accumulating a tax deferred cash value.
Which of the two, Miami whole life insurance or Miami term life insurance, works best for you? Get your free Miami life insurance quotes today and find out!
