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What is Whole Life Insurance?

It will come as no surprise to learn that the subject of life insurance is a minefield and if you are thinking about taking out a policy it is critical that you do as much research beforehand as possible in order to prevent yourself from making a huge mistake. 

There are two main types of life insurance, although within these two categories there are a vast number of variable factors that you must consider before settling on a policy. The two policy types are term life insurance and whole life insurance. As the names suggest, term life insurance lasts for an agreed fixed term and not a day longer whereas a whole life insurance policy lasts for the duration of the insured person's life. There are advantages to both and the type of policy that is most suitable for you will depend on your circumstances. 

Very broadly speaking there are two types of whole life insurance. You can choose to pay regular premiums and know that upon your death your beneficiaries will receive an agreed fixed sum. This is the most simple form of life insurance. In addition you could also choose to invest some of your premium in a savings scheme related to the insurance policy. Your family will still receive an agreed fixed sum but in addition they will also receive the balance of the savings scheme and sometimes an extra payment based on a percentage of the sum of these two parts. 
In most circumstances a whole life insurance policy will last longer than a term life insurance policy and is therefore more expensive too. As there are many intricacies to whole life insurance policies it is highly advisable to consult a life insurance broker for specialist advice. There are too many variables to explain them all here in the required detail - these are things that you will need to talk to the broker about. 

Some life insurance policies may halt your premiums once you reach the age of 65, however the cover still remains. This just means that you will probably have paid more on a monthly basis previously than for a policy that requires premiums to continue after the age of 65, therefore you will still have invested the same amount overall. From a consumer's point of view the advantage is that you will no longer have to actively pay for your life insurance during your retirement if you choose a policy with premiums that cease at aged 65. 

One of the disadvantages with a whole life insurance policy is that the interest earned on the savings investment scheme may be a pitiful amount - you might find that you do better by investing this money yourself in a high interest account. Keep your eyes peeled for policies that offer high levels of interest or savings accounts that do the same. Another danger is that the premiums are either too low to make the policy worthwhile or to expensive for you to afford. If this happens you could find yourself in a position of having to cancel the policy and not receive a penny from the insurance company. 

Always make sure that you understand absolutely everything to do with the insurance policy. If just one aspect is not right for your needs you could find yourself losing a lot of money.

Disclaimer: The information contained on this page is not intended, nor should it be construed as providing any form of financial advice or guidance as to which insurance product/policy is right for you. If you are unsure as to which product meets your requirements/needs you should always seek advice from an Insurance Professional.

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