There are so many different options for buying life insurance in Mexico, but it’s really not that complicated. There are essentially two kinds of policies: term life insurance and whole life insurance. Term life insurance lasts for a specific amount of time (the term) and expires at the end of the policy. Whole life insurance, on the other hand, is a form of permanent life insurance. There are more insurance plans that fall into these two categories, each with their own benefits and drawbacks.
Term life insurance and whole life insurance
Term life insurance lasts for a set number of years before it expires. If you die before the term is up, a set amount of money, known as the death benefit, is paid to your designated beneficiary.
Term life is considered the simplest, most accessible insurance policy. When you make your payments (known as your premium), you’re paying for the death benefit that goes to your beneficiaries in the event of your death. The death benefit can be paid out as a lump sum, a monthly payment, or an annuity. Most people elect to receive their death benefit as a lump sum.
Term life insurance policies are more affordable than other types of life insurance policies. The policy expires at the end of the term.
Whole life insurance, on the other hand, is considered a permanent life insurance policy because it does not expire. It has a death benefit but also a cash value, as a savings account that is included in the policy. The cash value accrues interest at a predetermined fixed rate. Each month, a certain portion of your premium will go into the cash value of the policy, which offers a guaranteed rate of return (the exact amount that goes into savings is determined by your individual policy). The policy's cash value grows over time.
Due to the fees and the extra feature, a whole life insurance policy can cost five to 15 times as much as a term life policy for the same death benefit amount.
Whole life lasts for as long as you pay the premiums.
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