Life insurance is an agreement between the insurer and the policy holder wherein the insurer designates a beneficiary that will be paid by the policy holder in case of his demise. There are many types of life insurance to choose from and the 2 most well-known types are the term and whole life insurance.
Term life insurance, also called as term assurance, is a type of life insurance that is commonly chosen by most policy buyersbecause this is the cheapest means of getting benefits. However, this may be quite expensive for older adults as the chances for them dying are close. It covers a limited period of time and has a fixed premium all throughout the term. Normally, a buyer may choose from 5, 10, 15, 20 years depending on what the company has to offer. Like any other life insurance policy, the policy holder will designate a beneficiary that the insurer will pay in case of his untimely demise. But if the policy holder stopped paying the premiums, not just the policy will be terminated but also he cannot expect any death benefits in case of his death as well as his beneficiary. Therefore, as a policy holder, you need to pay your premiums before the due date depending on the mode of payment you have chosen. It can be monthly, quarterly, semi-annually or annually. Since term insurance has fixed premium, it also has death benefit which is also fixed so regardless of the years you have been paying your premiums, you will still get the same amount of benefits.
Whole life insurance, on the other hand, is the most expensive type of life insurance that offers fixed premium and death benefits. The only difference with the term insurance is that it assures cash value rate that builds. This cash value of your account is considered a financial asset of the policy holder and can be converted into cash after several years to get some money back. Whole life insurance policies are intended to mature. This commonly happens if the insured reaches 100 years old upon maturation, the policy will be terminated but the insured person will surely get his death benefits.