When considering insurance products, is whole life insurance the right one for you

The main driving force for people, in my experience, when they are thinking about a whole life insurance product is that when compared to level term insurance it isn't dead money. This is likely the main driving force behind most peoples thinking.

Level term insurance is set up for the precise reason that it provides insurance to cover the life of a person at the most inexpensive cost possible and once this is understood you can see the plan has no cash value should the person survive the term. The majority of people are aware of this and that the money they have paid is dead should they survive the plan term thus rendering it valueless.

Conversely, whole life insurance reverses this idea as throughout the plan it builds up a cash value and whilst this may not be an enormous sum, it is sufficient to enable people to feel their money is not being wasted. However, partly because this plan is always building up a cash value, it is somewhat more expensive when compared to the level term insurance plan.

The question to ask yourself is, "does this meet with the requirements I have for life insurance and what is the alternative if it isn't?" The answer I always give to my clients is that while whole of life insurance is a grand product when your need for insurance is not bound by term say for instance to cover a mortgage, if life insurance requirements are for perpetuity then whole life insurance can be the only way to go.

Whole of life insurance is exactly what it says it is, it runs for all of your life and although it does have a cash value it should never be considered as a savings plan because that is most definitely not what it is. If it's savings you are thinking of then there are many more efficient plans out there in the market which are completely focussed on saving money and which will produce far more for you than a whole of life insurance plan.

Now supposing you want life insurance but it is beyond your thinking that you are not going to get any cash return if you don't die, you have to decide what it is you can do. The first thing would be to recognise that any term plan as opposed to a whole of life plan will show a big difference in the comparison, meaning that you will have to spend considerably more on the whole of life.

I would propose you weigh up the variation between both plans and instead of contracting in for a whole of life insurance, buy a term plan for the term required, and spend the variation between both plans on a monthly investment plan say for example a savings plan or maximum investment plan.

The returns will be quite surprising in that you will, without doubt receive more money than you would with a whole of life insurance plan. You would also have greater flexibility over your savings plan, because they are usually written on a ten year basis, with the option at the end to renew. Be aware though that if your requirement is to have a life insurance plan for your entire life this is not what you get and you would therefore need to carefully consider this suggestion. If you want some returns in the future and you do not need a whole of life cover then this is option is solely for you.

Further information for saving and life insurance choices should always be discussed with a certified financial planner or an independent financial adviser. They are able to discuss with you all available products and how they will perform for you in the future.

Article by: ChrisClare | Total views: 204 | Word Count: 625

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