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Whole Life Insurance
Whole Life insurance is usually
designed to be in force as long as you live at
a premium that does not increase with your age
after you buy. In the early years of the policy,
when you're a low risk, you'll pay more in premiums
than it costs to insure you.
As you become a higher risk at an older age, the
level premium eventually becomes less than the
amount it takes to insure you. Level premium payments
build a reserve in your policy that is used to
insure you as you age. Insurance companies call
this reserve the "cash value."
Term Life Insurance
Term insurance typically offers
lower initial premiums than Whole Life. The coverage
generally renews for an increased premium based
on the attained age at renewal. Benefits are paid
only if death occurs during the coverage period.
- Term is named for the
contract's limited length or "term".
- Term insurance usually
has no cash value.
- Term policies generally
last for 1, 5, 10, 15, or 20 years, or to some
specified age such as age 65 or age 100.
- If you die during the
term, the insurance company will pay the death
benefit.
- If you don't die during
the term period, no benefits will be paid —
you may be able to renew the contract at the
end of the term period, or you'll need to buy
another policy.
Convertible term policies can be
exchanged for permanent insurance without requiring
evidence of good health. If the policy is converted
to a Whole Life policy, premiums will be based
on your age at the time of conversion.
Next
» 3. What Type Of Life Insurance To
Purchase
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Term
and Whole Life