Term life and whole life insurance are the two main types of life insurance that must Canadian own. Life insurance is an essential financial tool that can help provide financial security for you and your loved ones in the event of your death. There are two main life insurance policy types: term life insurance and whole life insurance. Understanding the differences between these two policies can help you determine which one is right for you.
Term life insurance
Term life and whole life insurance are the most popular forms of life insurance, and both have unique features. To know which suits your needs the most, you must learn more about each individually. Term life insurance is a type of life insurance that provides coverage for a specific period or term. These policies typically last for 10, 20, or 30 years, and the policyholder pays a fixed premium for the length of the term. If the policyholder dies during the policy’s term, the beneficiary will receive a death benefit. If the policyholder does not die during the policy’s term, the policy will expire, and the beneficiary will not receive a death benefit.
Term life insurance is often the most affordable because it provides coverage for a limited time. It is a good option for people who need coverage for a specific purpose, such as paying off a mortgage or providing financial support for their children until they are financially independent.
Types of term life insurance
There is a noticeable difference between the term life and whole life insurance types. There are several types of term life insurance, each designed to meet the needs of different customers. In general, term life insurance can be grouped into three main categories:
- Level Term Policies: Also known as level-premium policies, these policies provide coverage for a specified period, typically ranging from 10 to 40 years. The premium and death benefit are fixed for the duration of the policy.
- Yearly Renewable Term Policies: These policies are not specified and can be renewed yearly. The premium increases every year as the policyholder ages. These policies can become expensive over time, making them a less popular choice.
- Decreasing Term Policies: These policies are designed to be more cost-effective, with the death benefit decreasing according to a predetermined schedule each year. Decreasing term life insurance is often used to cover liabilities such as a mortgage, as the debt is paid off and the need for coverage decreases.
Choosing the correct type of term life insurance coverage that meets your current needs is essential.
Benefits of term life insurance
Term life and whole life insurance each have many benefits; however, these benefits are very different and serve different financial needs. One of the main advantages of term life insurance is that it is generally less expensive than other types of life insurance. This makes it a good option for people on a tight budget and needing life insurance to protect their loved ones in the event of their death.
Another advantage of term life insurance is that it is relatively straightforward. The policyholder pays a fixed premium for the length of the term, and the policy provides coverage for that period. There are no complicated features or investment components, which makes it easy to understand and manage.
However, term life insurance also has some drawbacks. One of the main disadvantages is that the policy will expire unless the policyholder dies during the term of the policy. This means that the policyholder will not receive a death benefit if they survive the policy term.
In addition, term life insurance does not have a cash value component, which means that the policyholder cannot borrow against the policy or withdraw any money from it. This can be a disadvantage for people looking for a life insurance policy that also provides a savings component.
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Process of obtaining term life insurance
Term life and whole life insurance purchase process are similar. Obtaining life insurance with Apluswealth Advisors involves three essential steps. First, we conduct a needs analysis to determine the amount of coverage needed based on the client’s current financial situation and future goals. This includes reviewing the purpose of obtaining term life insurance, evaluating the client’s current financial standing, and considering how their needs may change over time.
The second step is to review the health status of the proposed insured individuals. This is important because the policyholder’s health can significantly impact the cost and availability of term life insurance. We will complete a health questionnaire to assess the overall health of the proposed insured and determine the most efficient route to obtaining coverage. Our expert advisors work with reputable insurance providers and stay up-to-date on their underwriting guidelines to ensure that we can provide the best options for our clients.
Finally, we will complete a customized policy to meet the client’s specific needs once we have the necessary financial and health information. Our advisors will present hand-picked options to make decision-making easy and efficient. With access to top insurance providers, you can be confident in choosing between term life and whole life insurance.
Whole life insurance
Term life and whole life insurance are very different products serving different customers’ needs. Whole life insurance, also known as permanent life insurance, is a type of life insurance that provides coverage for the policyholder’s entire life. These policies also have a savings component, which allows the policyholder to accumulate cash value over time. The policyholder pays a fixed premium for the policy’s life, and the policy accumulates a cash value that can be borrowed against or withdrawn. If the policyholder dies, the beneficiary will receive a death benefit.
Types of whole life insurance
Whole life insurance can come in two varieties: participating and non-participating. Participating in whole-life insurance policies allows policyholders to receive a share of the insurance company’s profits through dividends. These dividends can vary from year to year and are not guaranteed. Participating whole life insurance policies also have a cash value component that allows policyholders to borrow against or withdraw from their policy or transfer it to their beneficiary upon death.
Non-participating whole life insurance policies do not offer dividends to policyholders. However, they offer fixed premiums, lifetime protection, and guaranteed cash values. Some non-participating policies can even be paid up in a limited number of years. Non-participating whole life insurance policies may have lower premiums than participating policies.
Benefits of whole life insurance
To know the suitable insurance product, we covered the benefits of term life insurance, and now we will look into whole life insurance benefits. The term life and whole life insurance benefits are fantastic, but they are built for different purposes. One of the main advantages of whole life insurance is that it provides lifelong coverage. This is a good option for people who want to ensure that their loved ones will be financially protected in the event of their death, no matter when it occurs.
In addition, whole life insurance has a cash value component, which means that the policyholder can borrow against the policy or withdraw money from it if needed. This can be useful for people looking for a life insurance policy that also provides a savings component.
However, whole life insurance is generally more expensive than term life insurance because it provides lifelong coverage and has a savings component. This can be a disadvantage for people on a tight budget who may need help to afford the higher premiums.
In addition, whole life insurance can be more complex and may require more management from the policyholder. The policy has a cash value component that needs to be monitored and managed, and the policyholder may need to decide how to allocate their premiums and cash value.
Lastly, whole life insurance policies can be customized with various riders, which are additional benefits or coverages that can be added to the main policy. Different insurance companies offer a range of riders on their whole life insurance policies, but they may only provide some of the options listed below. Suppose you are interested in adding a specific rider to your policy. In that case, you should consult your insurance advisor and choose a policy from an insurer that offers the rider you want.
- Accidental Death Benefit: This rider pays an additional benefit if the policyholder dies in an accident.
- Disability Income Rider: This rider pays a regular income to the policyholder if they become permanently or totally disabled.
- Level Term Rider: This rider adds a fixed amount of term insurance to the whole life policy for a specified number of years.
- Living Benefits Rider: This rider pays a portion of the death benefit to the policyholder if diagnosed with a terminal illness with a life expectancy of 12 months or less.
- Long-Term Care Rider: This rider pays for long-term care expenses if the policyholder meets the criteria for this rider.
- Waiver of Premium Rider: This rider waives the policy’s premiums if the policyholder becomes disabled or unemployed, preventing termination or disruption in the policy.
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Process of obtaining whole life insurance
Term life and whole life insurance purchase process are similar. Like term life insurance, the process for obtaining whole life insurance consists of three general steps. First, we conduct a needs analysis to determine the amount of coverage needed based on the client’s current financial situation and future goals. This includes reviewing the purpose of obtaining whole life insurance, evaluating the client’s current financial standing, and considering how their needs may change over time.
The second step is to review the health status of the proposed insured individuals. This is important because the policyholder’s health can significantly impact the cost and availability of the whole life insurance. We will complete a health questionnaire to assess the overall health of the proposed insured and determine the most efficient route to obtaining coverage. While all insurance companies follow similar guidelines for underwriting the health of proposed insured individuals, there may be differences in how they evaluate certain conditions.
Finally, we will complete a customized policy to meet the client’s specific needs once we have the necessary financial and health information. Our expert advisors will present hand-picked options to make decision-making easy and efficient. With access to top insurance providers, you can be confident in choosing between term life and whole life insurance.
A final word on term life and whole life insurance
Finding the term life and whole life insurance policy with the proper coverage amount at the right price and its process can be complicated and overwhelming. Some people may need both policies, so they obtain multiple policies of both term life and whole life insurance.
Our expert advisers are fully qualified to help you with the difference between term life and whole life insurance and work out the coverage that will meet your family’s needs. Taking your age, health, liabilities, and goals into consideration and helping you understand the suitable option between term life and whole life insurance.
At Apluswealth, you can get a quote, compare quotes, and learn more about term life and whole life insurance. Our life insurance advisors will provide quotations and the most suitable policy types.
Contact our expert advisers today to find the best life insurance.
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