When deciding on what kind of insurance policy to get, many people automatically default to a term life policy because the rates are usually cheaper. While whole life insurance rates are typically higher than term life rates, this does not mean that it is not worthwhile to at least look into the reasons why whole life rates are so high. Upon further inspection, you will find that you get a lot more for your premium on a whole life policy than you do with a simple term life policy. Depending on what is important to you, whole life might be a better option for you.
Whole life rates are higher
There is a good reason why whole life rates are higher. Whole life and term life differ in that whole life also includes an investment aspect. When you pay a whole life insurance premium, that premium is invested in financial instruments, like stocks and bonds. The dividends from those investments are what will ultimately pay the death benefit on your policy. Unlike a term policy, in which you get nothing if you survive the term, you are guaranteed a return on your investment. At the very least, your beneficiary will receive the death benefit after you pass away.
Life insurance policies
Another reason that whole life rates are higher is because whole life insurance policies require more specialized management. A whole life insurance company must employ not only insurance professionals but investment professionals as well. It is in the best interest of everyone for the insurance company to find sound investments. They cannot do this without hiring people who are familiar with investing, which is going to cost more than a straight-up insurance account that only needs to be handled from an insurance point of view. Whole life policies are far more complicated, and they require specialized care.
Receive the financial help
When it comes to whole life insurance, you are getting what you pay for. Ultimately, the person most affected by the choice you make in regard to this insurance is your beneficiary. If you choose wisely, then they will benefit from your choice. If you do not, then they may suffer more than they need to in the event of your death. Whole life rates may be high, but at least they can guarantee that your beneficiaries will receive the financial help they need in this difficult time. If you are more concerned with quality than price, then you will make a better decision about your insurance.