The Difference Between Term And Whole Life Insurance

There is a significant difference between term life insurance and whole life insurance. In a nutshell, whole life insurance is permanent, and term life is temporary. Whole life is guaranteed to last your whole life as long as your premiums are paid. The premiums do not increase, the benefits do not reduce, and the policy cannot be canceled due to health or age. Term life is for short-term coverage. The premiums are not guaranteed other than for a predetermined period of time, and this is referred to as the level premium period. Not all term life policies have the option to renew, but those that do, charge significantly higher premiums from year to year beyond the level premium period. Many companies who offer term life insurance offer 10, 20, or even a 30-year term. Some companies have options like 5 or 15-year terms as well. This type of coverage is valuable only in the event that someone passes away prematurely while in the process of paying a mortgage or running a business. Term is very inexpensive compared to the death benefit, and certainly compared to the cost of whole life insurance. Someone with health issues will not qualify for a Term Policy. The rule of thumb when it comes to term life insurance is that a policy will only be issued to someone whose health is good enough that the company believes that they will outlive the term. The longer the term period the more expensive, and the harder it may be to qualify. Otherwise, people with health issues who think they don't have long to live would always buy a Term Policy because of significantly higher amounts of coverage for a lesser premium than whole life insurance. Almost anyone can qualify for whole life insurance except for those who have been given a life expectancy of 12 months or less, are currently hospitalized, and or reside in a nursing home. The larger the amount of life insurance one applies for the more underwriting criteria must be met to be accepted for coverage. One of the easiest ways to spot the difference between whole life and term life is when comparing the premiums to the death benefit. The premium for whole life coverage calculated out to the age of 100 will usually be more than the death benefit amount, sometimes significantly more. Calculating the term life premiums versus the death benefit amount, the amount of premiums paid within the level premium period can be less than 25% of the full death benefit. 

One of the most common misconceptions when it comes to life insurance, in general, is due to advertising. If you've ever seen a commercial that talks about a 40-year-old male nontobacco who qualified for $500,000 of coverage for less than a dollar per day, and you do the math, that's less than $400 per year. You'd have to wonder how a company can afford to strike a check for half a million dollars if they've only collected $24,000 by the time the insured reaches 100. It's no wonder people think insurance is a scam. This is because the "fine print" will tell you that this advertised product is a Term policy that only lasts for 5 or maybe 10 years at best. Of course, he has to be incredibly healthy to qualify, because the company would go broke if they had to pay claims like that. Unless death is due to an accident, the company has determined that there's hardly a statistical chance that death would be from natural causes if they're issuing that policy. So you can imagine why someone who is offered a $10,000 policy for $1,000 a year would immediately call that a scam while pointing out the commercial they saw about the $500,000 policy. Advertising has to grab attention quickly, and that is why most life insurance policies are sold at someone's kitchen table. They have usually filled out and mailed back a reply card to request more information about something they read that likely led them to believe that the state was providing a free benefit. Usually, after a few people stop by and explain the same thing it starts to dawn on people that life insurance isn't cheap. It is however the only way that they can rest assured that their family will have the funding to handle their final wishes. This is another reason it is incredibly easy for someone to make the decision to change from one whole life policy to another, the moment the next agent shows them where they can save $10 or $20 per month if they switch companies. I can assure you the insurance agent is the only one who benefits when an insured cancels one policy to start a new one. I do believe stricter regulations should be put in place to control and prevent simplified issues with whole life insurance Replacements within the senior market. This has led to so many claims not being paid in full and should be regarded as a crime. Check out my post about "Final Expense life insurance" These are whole life policies that are primarily used for funerals, and handling cremation or burial and other final expenses. 

Ohio Final Expenses