Life insurance is designed to provide money for your beneficiary upon your death. If you are a younger person, you may want life insurance to replace your income in paying large debts like mortgage payments or education expenses. If you are an older person, you may want life insurance to pay for final expenses or to provide support for those who depend on you. The two types of life insurance are term and whole life.
Term Life
This type of insurance provides protection only for a specified term or time period. Premiums for term life insurance policies are generally lower than for whole life insurance policies. At the end of the term, your coverage ends and you receive no monetary return. The coverage amount in a term policy may remain level or vary depending on the terms of the policy.
Whole Life
This type of insurance provides protection for your whole lifetime. Premiums for whole life insurance are generally higher than for term life insurance policies. Your coverage will continue until your death, when your beneficiary will receive the proceeds of the policy. Whole life insurance is sometimes also called ordinary life insurance or cash value life insurance. The coverage amount may remain level or vary depending on the terms of the policy. When the coverage varies the policy may be called a variable or flexible whole life policy.
Risk Ratings
Insurance premiums are determined based on the amount of risk you represent to the insurance company. The insurance company will consider factors such as age, gender, type of employment, type of hobbies and your health when determining your premium. People who have little risk of dying before the average life expectancy of a similar person their age and gender will generally pay lower premiums, while those who have a greater risk of dying will generally pay higher premiums.
Medical Examinations
Whether or not you will need a medical examination to qualify to purchase a life insurance policy will be determined by the face amount of the policy you are purchasing, your age and the insurance company. Generally, the higher the face amount of the policy or the older you are, the greater the likelihood that you will be required to undergo a medical examination. The cost of such an examination is usually borne by the insurance company.
Making Changes
Depending on the terms of your policy, you may be able to convert a term policy to a whole life policy. The advantage of converting a policy is that you generally do not have to undergo a medical examination, which is a big plus for policy owners as they age. You may also have the option of renewing a term policy for another term. Again, it is unlikely that you will have to undergo a medical examination.
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