If you’re currently looking to buy a life insurance policy, you may feel overwhelmed by the sheer quantity of purchasing options available to you. As a result of your inquiries regarding life insurance, you’ve probably encountered talk of “term life insurance” and “whole life insurance”, as the terms are thrown around rather repetitively. While it’s obvious that these categories describe two of your most prominent policy options, the details are often left somewhat veiled unless a further response is prompted. Both options have benefits and drawbacks dependent on variables like health, age, and lifestyle. Below we answer the common question of, what is the difference between term and whole life insurance?
Term Life Insurance
Term life insurance offers life insurance policies that accommodate a tighter budget. Providing coverage for only a temporary, designated, period of time, term life insurance is designed to provide a payout to your beneficiary should you pass unexpectedly within the contracted term. Term life insurance is sometimes also called “pure life insurance”. This phrase comes from the idea that term life insurance is used to pay out to your dependents in case of your unexpected death.
However, if you do not pass during the term in which your contract states that coverage is valid for, the original terms of policy will terminate. You can convert your policy to a permanent plan that the company offers. Your policy will renew on an annually renewable basis. However, these rates will be much, much higher than the original premiums. During the original term period, your rates are guaranteed to never increase and the death benefit is paid immediately. The only exclusions are if death occurs due to suicide during the first 2 years.
Term life insurance for diabetics is one of the most attainable, and more affordable life insurance purchasing options. Non Medical Exam plans may be available to people with type 1 and type 2 diabetes as well. Often times these plans are approved in 2-3 days. Term life provides a financial back-up suitable for covering expenses such as mortgage payments, etc., should the policy holder pass prematurely before they are able to be more financially free.
Term life insurance policies typically provide coverage for 10, 20, or even 30 year terms. These terms are set up so that you can plan out when you may want coverage to end. For example, if you feel that your children may be out on their own and have careers of their own and may not require the financial assistance from your life insurance policy within the next 20 years, then a 20 year term life insurance policy may be the best fit for you.
Whole Life Insurance
On the contrary, whole life insurance policies offer coverage indefinitely from approval through death. While whole life insurance for people with diabetes is easier to obtain, it will be more expensive. When an individual with diabetes is permitted to purchase a whole life insurance policy, it is likely that the premium will be at a substantially higher rate than would be seen quoted for a healthy individual or as is seen with term life insurance premiums.
For this reason, people with chronic medical conditions like diabetes are often more inclined to purchase term life policies. However, if income isn’t a concern, whole life insurance policies can be hugely beneficial. Whole life policies build a cash value over time and are tax-deferred. This means that you won’t have to pay any taxes on the gains. Whole life policies have the potential to be labeled as assets, able to be borrowed against in emergencies or for large expenses like college tuition or a new family vehicle. The payout is guaranteed unlike with term life insurance policies.
Another positive for whole life insurance for diabetics is that people who want whole life policies are often worried about having coverage that covers their “whole life” Also, they like knowing that if they cancel/surrender the policy, they’d receive the cash value of the policy.
Similarities Between Term Life and Whole Life Insurance
Both term life insurance policies and whole life insurance policies typically retain the same premium amount for the duration of time for which the policy is held. While premiums will surely differ, it is possible for individuals with chronic illness like diabetes to hold both types of policies despite popular belief. In extreme cases of illness, anyone can be denied coverage regardless of whether they have applied for term life insurance or whole life insurance policies.
Also, whether you hold a term life insurance policy or a whole life policy, the payout amount is guaranteed if death occurs during policy terms.
It is important to speak with a licensed insurance professional in order to determine which option is most suitable for your needs. You can fill out this quick form to hear back from an independent agent who works only with people with diabetes.