Term Life Insurance or Whole Life Insurance
Which is best for you?
Term Life Insurance
For individuals who are in the process of buying life insurance, the search would eventually lead to two choices; Term Life Insurance and Whole Life Insurance. In this article I would like to try to make the choice easier for you.
For those who are in a tight budget and would still like the protection and security provided by having a life insurance policy, term life insurance should work for you. Term life insurance is widely popular due to the fact that it is affordable and fits the average person’s financial needs. The downside to term life insurance is the fact that it only offers protection over the chosen term, not for the whole of life.
For those looking for an investment option aside from financial security provided by having a life insurance policy, then whole life insurance is for you. Whole life insurance is rather more expensive than term life insurance. This is due to the fact that a portion of your premium is added to your policy investment fund.
Pros and Cons of both forms of life insurance
In general both term life insurance and whole life insurance plans offer similar protection benefits but the key benefits of a term life insurance policy are detailed below:
- Death Benefits -
- Death Cover – A predetermined lump sum is paid out to the policy owner’s nominated beneficiaries in the event of death.
- Living Benefits
- Critical Illness Cover – A predetermined lump sum is paid out to the policy owner in the event of the policy owner suffering from any of the critical illnesses mentioned in the policy schedule such as heart attack, cancer, multiple sclerosis, deafness, blindness etc…
- Total Permanent disability – A predetermined lump sum is paid out to the policy owner in the event of the policy owner suffering from total permanent disability.
- Terminal illness benefit – If the life assured has less than one year to live the death cover is paid out in advance to allow the policy owner to set his affairs in order.
In contrast whole life insurance policies offer slightly better benefits such as -
- Death Benefits-
- Death Cover – A predetermined lump sum is paid out to the policy owner’s nominated beneficiaries in the event of death due to any cause except suicide.
- Accidental death cover – If the policy owner dies due to an accident, an additional lump sum is paid out apart from the death cover.
- Family Income Benefit – A predetermined lump sum is paid out to the beneficiary for every remaining year in the term chosen at policy inception.
- Additional term life cover – Some plans have an additional term life cover that can be chosen within the whole life insurance policy to cover temporary investments such as mortgages, loans etc…
- Aeroplane cover – An additional lump sum is paid in the case of the policy owner dying in a plane accident.
- Living Benefits
- Critical Illness Cover – A predetermined lump sum is paid out to the policy owner in the event of the policy owner suffering from any of the critical illnesses mentioned in the policy schedule such as heart attack, cancer, multiple sclerosis, deafness, blindness etc…
- Hospitalization benefit – A fixed amount is paid out if the policy holder is hospitalized for 3 days or more for any reason.
- Long-term care benefit – A fixed annuity is paid out over 10 years for long-term care after the age of 65 if the policy owner cannot perform certain number of activities of daily living to take care of long-term care expenses.
- Waiver of Premium – This insurance company waives the policy premiums if the policy holder cannot earn money due to disability or serious illness.
- Total Permanent disability – A predetermined lump sum is paid out to the policy owner in the event of the policy owner suffering from total permanent disability.
- Terminal illness benefit – If the life assured has less than one year to live the death cover is paid out in advance to allow the policy owner to set his affairs in order.
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