Comparing Life Insurance Types

The two primary types of life insurance you can buy are term life insurance and whole life insurance. Both have their advantages and disadvantages, and which you should choose is based on many personal factors that determine which is best for your situation at this point in your life. Your smokers life insurance rate will be determined largely by the type of policy you wish to write.

Term Life Insurance

The simplest and most straightforward of all life insurance types is the term life insurance policy. In effect for anywhere from 1 to 30 years usually, a term life policy does exactly what most people think of when it comes to life insurance: you pay into the policy regularly, and when you die, you receive a death benefit in the amount you agreed for when you signed on. Term policies have their advantages in that they are inexpensive, quick, and easily managed, usually with no frills to get in the way of an otherwise simple transaction. Their primary disadvantage is that the older you are, the more expensive they get and keeping yourself insured throughout your life by constantly renewing a term policy can be extremely costly as you near life expectancy. The longer you take out a term policy for, the more expensive it is, because the risk of your dying over a thirty year period is substantially higher than over just a one or five year period. Term life insurance policies can leave you exposed to the changes of financial fate as well in between renewals of your policy.

Whole Life Insurance

Whole life insurance, sometimes known as permanent insurance, is life insurance that is initially purchased for the duration of your entire life. Naturally this poses significant risk to the insurance company since - if you keep up with your payments - they are guaranteeing to pay a death benefit on you in most cases, so whole life policies tend to be more expensive. In another sense, however, this makes them more practical than a term policy because according to a joint study that took place in 2005 involving more than 8 million term insurance policies that were written by 22 insurance companies in a 3 year period, less than 1/2 of one percent of the policies ended with a death claim. A whole life insurance policy that is properly managed does not run that risk of wasted money.

In addition, whole life insurance policies have a cash account that accrues as a part of your payment. This money can be accessed by you later in a variety of ways. In some cases the cash account will grow large enough that the interest alone will pay your monthly premiums so you canstop paying for your life insurance and continue the coverage. You may also be eligible to take out a loan to yourself out of this policy if you ever find yourself with a financial need.