Term, Whole, and Life – What’s the Difference in Insurance Terms?

When people think of life insurance, they usually feel a certain amount of trepidation. Life insurance, after all, is about preparing for the inevitable and it is only natural to be put off by the prospect of preparing for your own death. Most people also feel that it is better to provide for their family by means of a sound investment portfolio rather than spending money on life insurance premiums, which can certainly get pretty expensive. Even though there is very little variation in insurance rates by ZIP code, you will find that the costs can range widely based on what type of life insurance policy you choose to get.

There are three major categories of life insurance policies. These are:

Term Policy

If you look up term policy life insurance rates by ZIP code, you will find that there really is very little divergence from one state to the next. Any differences in cost are merely a result of a state’s specific policies governing the insurance industry. What you will notice however, is that term life policies are the cheapest form of life insurance you can get in any state. Term life policies are always well-priced because they cover the insured party for the stated term of the policy. Once that period of time is over, the policy can either be renewed or dropped, in which case the premiums paid are not returned to the policy holder. Of course, if the policy holder were to die before the term was over, the insurer would pay the policy out to the beneficiary.

Whole Life Policy

Whole life policies are routinely more expensive than term policies are regardless of what state you live in. A whole life policy typically covers the policy holder for the entirety of their life. These policies are usually worded in discrete terms, meaning that the policy is offered for a set, though long, period of time, such as fifty years. However, there are cases where the policy holder outlives the terms of the policy, however far-reaching they might be. In such cases, the policy is paid out in full to the policy holder. Whole life policies are definitely pricier, but the advantages to the policy holder are manifold. Apart from providing a comfortable financial cushion for the distant future, many whole term policies allow policy holders to draw funds against their life insurance policy if they ever need to.

Universal and Variable Universal Life Insurance

These are a more complex form of life insurance wherein the policy holder’s premiums are essentially invested for them by the insurer. The returns on the investments are then deposited into the policy holder’s policy account. The primary benefit of a universal or variable universal life insurance policy is that it allows the policy holder to use those returns on investment throughout the term of the policy. Of course, each insurer will offer a different return on your policy and as a result, there is a certain disparity in universal life insurance rates by ZIP code.

The best way to determine if you are paying a reasonable rate for your life insurance policy is to compare insurance rates. If you’re moving, it is also a good idea to look into the difference in life insurance rates by ZIP code. There might not be a huge difference, but it is worth knowing what all of your options are, so that you can be absolutely sure you are paying the right amount for your policy.

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