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TERM LIFE INSURANCE versus WHOLE LIFE INSURANCE
What is a Term Life Insurance?
A term life insurance covers the insured for a fixed period and pays out a lump sum if the latter dies during the policy term. According to on-line life insurance adviser godirect.co.uk, it is the cheapest form of life insurance. However, there is no investment element with this type of insurance coverage; hence, the insured will not receive any amount as long as he is alive during the period stipulated. Insurance proceeds will only be paid out to the beneficiary if the insured dies before the term expires.
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In addition, insurance coverage operates only as long as the insured pays his insurance premiums. This means that should the insured fails to pay his premiums, the insurance policy, as well as the coverage, ceases to operate.
Some insurance companies give additional options in their proffered insurance coverage such as Critical Illness. In this case, the insured is given a lump sum amount when he is diagnosed as having a critical illness. At any rate, he may also be given the lump sum amount should he die during the policy term.
In addition, other insurance companies also offer an option waiving the future payment of premiums should the insured suffer an illness, which incapacitates him from engaging in his regular work, employment or occupation.
When taking out a Online Life Insurance , the insured should fill any life insurance application truthfully and in all honesty. Any misrepresentation or concealment of a material fact or information will give rise to the insurer’s right to rescind the insurance contract, and sue for damages against the insured. Accordingly, the former may refuse to pay the insurance proceeds should the event of death arise within the stipulated period.
What is a Whole Life Insurance Plan?
Based on the name itself, whole life insurance plans covers the policyholder’s whole life. This type of insurance plan is different from a term life insurance since the latter only operates within a stipulated period. Under the whole life insurance plan, the insurance company undertakes to pay the proceeds in the event the insured dies. However, whole life insurance plans cost more than term life insurance.
Godirect.co.uk tells that costs of premium payments largely depend on the policyholder. The insurer takes into account the age, sex and medical history of the policyholder. Longevity is also considered in computing the amount of premium payments.
Typically, an insured who smokes pays a higher rate of premium as compared to a non-smoker. Current legal standards define a non-smoker as one who has not smoked for at least one year. Insurance companies adhere to scientific studies, which time and time again reveal the link between smoking and serious illnesses, such as lung cancer and heart diseases. Accordingly, the insurer may impose a higher rate of premium to smokers due to the high risk of death associated to the latter.
Moreover, insurance companies charge higher rates of premium to those individuals who regularly engage in extreme sports activities such as snowboarding and mountaineering. Contact sports enthusiasts, like boxers and football players, are also charged higher rates of premium due to the inherent dangers associated in the activity.