Why Term Life Insurance Policies are the Best
Whole Life Insurance policies in Australia have been replaced with term life policies as the primary insurance type.
As an applicant, you can decide the term you would like to take out your life cover for.
The major difference between whole and term life insurance policy is the fact that an investment product and cash value is attached to whole life insurance, while term insurance simply consists of the life cover alone.
It is commonly claimed that insurance is sold, not bought. The reason why agents are responsible for selling the largest number of life policies in certain countries is because the insurance industry is largely interested in pushing high-commission whole life policies that are profitable to them. The returns quoted by such agents are mere guesses, and these are usually kept on the high side to attract buyers.
The truth is that policies with an attached investment component cost multiple times the cost of term policies. Whole life policies have high fees and commissions built into them, in addition to surrender charges (in case you want to cancel the policy) that could leave you with little to no cash value even 10 or 15 years after taking out the policy. Further, individuals that buy whole life policies are often unable to afford a sufficient face value, and are therefore left under insured.
Separating Insurance And Investment
In fact, it would be a lot more cost-efficient to keep your investments and insurance separate. There are much better places to invest that don’t have the high commissions associated with whole life policies. Today, you can even get a term life policy that covers you until you reach 99 years, and you can take advantage of one of the many savings vehicles with small commissions, much higher yields and complete portability.
Life insurance quotes should be taken for what it is – a tool, not an investment. The insurance company selling you a whole life policy will do so with the promise that the extra amount will be invested on your behalf. However, the investment will hardly grow at all because this type of insurance is expensive and the expenses eat up the interest. In most cases, people have little to show for these policies apart from the money they paid in, while the insurance company makes humongous profits. Read: How To Cancel The Mortgage
Insurance In Australia
Life insurance can be a very useful tool, but only when it is used for its intended purpose. As such, the fact that term life insurance is the most commonly available in Australia is actually a good thing. We are not at a disadvantage because whole life policies are not available to us. You should have no problem finding a term life policy to cover your family’s financial needs, as well as a suitable investment option outside insurance. Click here for more info.