For a very long time the whole life insurance policy was the mainstay of
the life insurance industry. In the beginning this was a non participating policy.
All you needed to do was pay your premiums and the face amount of the whole life insurance policy would be paid to your beneficiary upon your death.
People bought these policies, which were fairly small in size, mainly to pay off last expenses with an emphasis on funeral costs. They were actually tickled when they realized that they had built up a cash value after a few years from which they could take out a loan.
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The whole life insurance policy was such good business for the life insurance companies that they created the participating whole life policy which earned dividends for the policy owner. The premiums were a little higher than the non participating policy, but the
made the extra premiums worth it.
For the sake of competition the life insurance companies used net cost as a measuring stick to decide which policy was best for their clients to buy. All an insurance company had to do to rank well was to slightly raise their premiums, pay a little higher dividend and they looked pretty good when compared with the competition.
Then came interest adjusted net cost as the new
measuring stick. The competition got rough and other life insurance
companies felt that this net cost thing should be based on performance
and not just stacking the premiums.
The companies got into a battle to see who could keep the premiums lowest for the whole life insurance policy and still pay the highest dividend. The policy owner was the winner in the long run. The life insurance agent made money beyond his fondest dreams.
Enter some smart people who realized what was happening, put their thinking caps on and figured out that it would be easier to sell term life insurance to the public rather than a whole life insurance policy because the term policy was cheaper. The 20 year term policy took off like a rocket, and term life insurance became the most sold policy.
The big question is which one should you buy? Each has it's pros
and cons. Term life insurance can be real cheap. This gives people an
opportunity to buy a fairly large policy who would not be able to if
they were buying a whole life policy.
Term life has no cash value and no dividend, so there is nothing to get back in the end. In addition it is always wise to eventually convert to a permanent life insurance policy as the term period may pass before you die, thus leaving you without any insurance.
The whole life insurance policy lasts for as long as you want to keep it. It is permanent life insurance. It has a cash value and a dividend which you can collect either in the form of a policy loan or upon
surrender of the policy.
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Term life insurance is life insurance in it's simplest form. These policies stay in force for a specific number of years, for example, 5 years 10 years etc.
Whole life insurance is the plan of choice for many people. There are many variations to this plan.
Universal life insurance was designed with the express intention of combatting the venerable whole life insurance policy.
Are you looking for quality term insurance quotes? Have you determined how much you need? Do you know what type of term insurance is best for you?
In many cases it is a good idea to buy term insurance online. Some people know just how much life insurance they want to buy before they get online.