By Rosemary ONUOHA
You can choose to take out our Ensure Insurance Whole Life insurance plan, which provides lifelong cover; or our Term Life insurance plan, which covers you for specific periods. You can also choose to pay your premiums monthly, quarterly, half-yearly or yearly. Our flexible Life insurance plans are transparent, affordable.
What is whole life insurance?
Whole life insurance is a life insurance policy which is guaranteed to remain in force for the insured’s entire lifetime, provided required premiums are paid, or to the maturity date.
As a life insurance policy, it represents a contract between the insured and insurer that as long as the contract terms are met, the insurer will pay the death benefit of the policy to the policy’s beneficiaries when the insured dies.
Because whole life policies are guaranteed to remain in force as long as the required premiums are paid, the premiums are typically much higher than those of term life insurance where the premium is fixed only for a limited term. Whole life premiums are fixed, based on the age of issue, and usually do not increase with age. The insured party normally pays premiums until death.
A whole life policy matures at death or at the maturity age of 100 years, whichever comes first. The policy becomes a ‘matured endowment’ when the insured person lives past the stated maturity age. In that event the policy owner receives the face amount in cash.
The entire death benefit of a whole life policy is free of income tax, except in unusual cases. This includes any internal gains in cash values.
Whole life insurance typically requires that the owner pay premiums for the life of the policy. There are some arrangements that let the policy be ‘paid up’, which means that no further payments are ever required, in as few as five years, or with even a single large premium. Typically if the payer doesn’t make a large premium payment at the outset of the life insurance contract, then he is not allowed to begin making them later in the contract life. However, some whole life contracts offer a rider to the policy which allows for a one time, or occasional, large additional premium payment to be made as long as a minimal extra payment is made on a regular schedule.
Whole life insurance is a type of permanent life insurance, which stays in effect for as long as you pay the premiums. This means you never have to worry about uninsurability or losing your safety net as you get older.
Whole life is more complicated than term overall, but one definition you need to know is the cash value, which is an investment-like product coupled with the insurance policy.
But all of these come at a price. As mentioned, whole life insurance is much more expensive than term, sometimes as much as six to 10 times the cost. Many people don’t buy enough coverage or end up dropping the policy a few years after commencement because they can’t afford it.
What is term life insurance?
For term life insurance, the policyholder pays premiums regularly. If they die while the policy is in effect, their beneficiary receives a death benefit.
Term life insurance is very straightforward, which is the selling point for people who want a simple life insurance option. Term life insurance is also relatively inexpensive. Because it’s stripped-down life insurance, without additional fees or maintenance, it’s much more affordable than whole life.
Since life insurance is something you need to pay for over decades, affordability is a huge consideration. You can more easily buy the coverage you need at a price point you’re comfortable with than with other types of insurance.
The term is how long the policy is active. Term life policies expire after a set number of years, making it a good policy for anyone who expects to build wealth over time and won’t need the financial safety net life insurance provides later in life.
But the term limit also limits coverage. If you still need that financial safety net when you are in your 60s or 70s, you’ll need to shop for a new policy (which may be prohibitively expensive) or convert your term life policy to whole life to continue coverage – a feature offered by most carriers for free.
Term life insurance pros & cons Pros
Term life is straightforward and policies are easy to understand, so you don’t have to worry about hidden fees, exclusions or risks.
Term life policy is the most affordable type of life insurance.
You can cancel a term policy before it expires without losing any value.
When the policy expires, so will your coverage. If you still want insurance, you’ll need to shop for a new policy or convert your policy into a form of permanent life insurance.