When you are considering a life insurance policy, you are typically presented with two choices: a term or whole life insurance plan. When you contact a life insurance agent, he can provide you with a breakdown of the major features of each type of plan. If you are not yet ready to contact a life insurance agent, you can use a life insurance comparison website like CompuQuotes. After reviewing policy inclusions, you will then select the best plan based on your current need.
Step 1
Review the quoted premium rates for whole and term life insurance policies. Whole life insurance rates are significantly higher since they include the death benefit, cash value, and brokerage fees. The rates for term life are much lower since they only include payment for the death benefit and a smaller brokerage fee. The brokerage fee is nominal with term insurance because your money is not to be invested like whole life insurance plans.
Step 2
Look at the payment schedule for a term and whole life insurance policy. With a whole life plan, the premiums typically stay the same. For a term life plan, the premiums are likely to go up each year.
Step 3
Consider the length of the policy. With a term insurance plan, you are covered for a specific time period, typically between five to thirty years. With whole life insurance, you are covered permanently as long as you continue to make premium payments. If you purchase whole life insurance, you should expect to have the policy for at least twenty years according to the Smart Money website. This is the amount of time it would take for your investment to pay off.
Step 4
Perform an internal rate of return analysis on your insurance policies. If you are unsure whether you should choose a term insurance plan or a whole life insurance plan, you can review the internal rate of return on the while life policies. This can breakdown how much money you will make per year on the policy. A financial planner or accountant can perform this service for you.
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