Whole vs. Term Life Insurance in 2024: Differences Explained (+What You Need)

Before you start shopping for life insurance, you should know that there are two major categories of plans. Both whole and term life insurance protect those who rely on you financially, but each policy has unique benefits and risks.

What’s the difference between term and whole life insurance? Term life insurance costs less and covers short-term debts. Permanent life insurance lasts a lifetime and benefits people who have maximized their 401(k), Roth IRA, IRA options, and 529 plans.

Whole vs. Term Life Insurance: Pros and Cons

Cheap rates and simple policy terms are the most common reasons why people buy term life insurance instead of whole life.

Scroll down to compare insurance plans and get a closer look at the pros and cons of whole vs. term life insurance coverage.

Risks and Benefits of Term Life Insurance

If you’re considering short-term coverage, here is a list of the top three reasons to get a term life policy over permanent life insurance:

• Cheaper Rates: Term life is the most affordable type of protection you can purchase.
• Simple Policy Terms: As long as you pay your premiums, your provider will compensate your beneficiary the agreed amount if you pass during the policy’s term. There is no hidden cost.
• Conversion Options: You can cancel term life insurance at any time, even before it expires, or convert it into whole life insurance at the end of the term.

Although it’s a straightforward and affordable type of life insurance, there are a few cons of term life coverage you should be aware of:

• Rate Hikes: Once the term expires, your monthly term life insurance rate can significantly increase.
• No Cash Value: Once you outlive the policy term, you get nothing back unless you have purchased the return-of-premium feature at additional cost.
• Age Restrictions: Some life insurance companies will not sell term coverage to policyholders over a certain age.

The biggest risk of term life insurance is losing your investment if you outlive your policy. You can buy add-ons to protect your premiums or lock in rates at conversion, but these will raise your monthly rates.

Risks and Benefits of Whole Life Insurance

On the surface, whole life coverage can seem like an exclusive investment for the top-earners crowd. However, you may want to take a deeper look at these benefits of whole life insurance before making your decision:

• Lifelong Coverage: Whole life coverage never expires as long as you keep paying the minimum premium amount as stated by your company.
• Locked-In Premiums: Whole life insurance rates will never increase as you get older, and you can lock in the lowest rates if you buy coverage before you turn 40.
• Accelerated Death Benefits: This whole life insurance add-on can be a life-saver if you’re diagnosed with a terminal illness or life-changing injury. You can take out a percentage of the death benefits to pay for medical bills and lost wages.
• Cash Value: Part of the premium is deposited into a cash reserve that works as a safety net to cover monthly payments. You’re allowed to take cash out without paying tax penalties, and your cash value will be refunded back to you if you end the policy before you pass.
• Investment Opportunities: The policy’s cash value will grow yearly, and the dividends you earn are not taxable. Although the amount depends on your portfolio and the amount you invested, it is always nice to have extra non-taxable money coming back to you.

Unlike cash, properties, and jewelry, heirs have access to whole life insurance death benefits without any taxation. On the other hand, the earned interest from the deposit is still regarded as taxable interest income.

To avoid being penalized, consult your portfolio agent or accountant, and consider this list of whole life insurance cons before you buy:

• Expensive Premiums: Whole life insurance is more expensive than average, and many policyholders tend to buy less coverage than they truly need in an attempt to save money.
• Complicated Buying Process: Buying whole life insurance requires some knowledge of finance and investment strategy as there are many options to customize your plan to suit your goals and needs.
• Investment Risks: How much your cash value grows will depend on how well you set up your foundation during the early years of the plan and the volatility of the market.
• Tax Season Stress: The cash value gain and loss and your interest growth from the reserve accumulation can make tax preparation much more confusing.

Ultimately, if you wish your beneficiaries to avoid being taxed in the transferal of your inheritance, adding whole life insurance protection to your portfolio is a good option. Term life insurance is a better fit if you only need short-term coverage to pay any debts if you die unexpectedly.

Read More: Colonial Life and Accident Insurance Review

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Comparing Term and Whole Life Insurance Quotes

When you’re comparing the two policy types, the most obvious whole and term life insurance difference is price. Term life is cheaper than permanent plans.

How much more expensive is whole life insurance than term? Here is a whole vs. term life calculator chart of the ten largest life insurance companies in the U.S.

Whole vs. Term Life Insurance Monthly Rates by Provider & Policy

Term life insurance is the most popular type of coverage because it’s so affordable. Even as 30-year term life insurance rates increase, permanent protection packages still tend to be more expensive.

Take advantage of our whole vs. term life quotes comparison charts below to get a complete view of monthly costs from the best life insurance companies in the country.

Comparing Life Insurance Quotes from the Best Companies

Being the biggest provider doesn’t necessarily mean it’s the best. This whole life insurance rates chart lists free quotes from some of the most popular life insurance companies in the U.S. Compare these rates to the largest companies above to see which is the cheapest.

Life Insurance Monthly Rates by Provider & Policy

State Farm is the only life insurance company to make both lists, thanks to its stellar customer service and claims reviews. However, it has a lower financial strength rating than other providers. Learn more in our State Farm insurance review.

One of the easiest ways to find out whether a provider is trustworthy is to research its financial strength through rating websites like A.M. Best. The score will be based on the company’s financial health and its ability to pay the benefits.

You should look into the customer service reputation of a company. You can can find out a provider’s customer dissatisfaction and complaint ratio grade on the National Association of Insurance Commissioners (NAIC) website. You also have the right to look up your agent’s credential, licensing, and complaints information on the NAIC website.

Comparing Whole vs. Term Life Insurance Costs by Location

Life insurance rates differ depending on where you live. Use this table to compare whole vs. term life insurance quotes by state:

Whole vs. Term Life Insurance Rates by State and Policy

By checking mortality tables and comparing your region and state with other states’ payout statistics, a company may increase or decrease the average premium rate based on whether the area:

• Has a higher rate of obesity
• Has a higher frequency of serious natural disasters such as flood, tornado, and earthquakes
• Is prone to deadly illnesses or diseases
• Has a high crime rate

The number of policies sold in your state will impact premiums, and there can be different laws to mandate specific minimal coverages and how much companies can charge for a package.

Before you shop around for term vs. whole life insurance, it’s a great idea to visit your state’s life regulation agency for information. You can find a list of state insurance departments at the Insurance Information Institute (III).

Read More: How Allianz Became the World’s Largest Insurer

Term Life Insurance Explained

Term life insurance packages offer a limited time coverage for your dependents should you pass away before the set term terminates. If that occurs, the insurer will honor the agreement to settle your debts and estate taxes, as well as pay your beneficiaries a set amount of money as stated in the contract.

There are five types of term coverages. These policies are best for people who do not have a large financial portfolio but wish to secure a form of inheritance for their beneficiaries:

• Level Term Life: The death benefit of these policies remains the same throughout the whole duration of the coverage.
• Decreasing Term Life: The death benefit decreases by monthly or annual increments over the duration of the coverage.
• Renewable Term Life: The death benefit remains the same throughout the whole duration of the coverage. However, for every year, your premium will increase to secure the same amount of death benefit payout.
• Convertible Term Life: These plans allow the subscriber the flexibility of converting their term life to a whole life policy during an indicated interval of time without needing to provide evidence that they are in good health.
• Return of Premium Term Life: Some insurers offer this add-on and will refund premiums after your term life insurance plan expires. Please note that every company may have a slightly different payback system. Some may refund you the whole portfolio cos while others only return the premium cost.

Term life policies can range from one year to 30 years. Some providers have coverage that can last 40 years or up to a set age as set in the policy contract.

Among the types of term life insurance, decreasing term policies have cheaper rates. But this type of plan will not offer future security because it only provides the right amount of coverage if you anticipate paying off all your debts. So unless a person has a very specific financial goal, people usually opt for level term or convertible term policies.

Convertible term life insurance affords you the opportunity of getting cheaper rates upfront and upgrading to permanent coverage later. Whole life insurance rates will be cheaper since you can often bypass the medical exam as a term policyholder, and many providers offer loyalty discounts to customers who convert coverage.

Just be sure to learn everything you can about the process. Ask your provider what will happen to the benefits and how conversion will that affect your premium. You should also ask what will happen if your health has deteriorated during the policy’s term.

Read More: MassMutual Insurance Review

Term Life Insurance Premium Costs

Full term life insurance quotes are heavily dependent on your age and health at the time of the purchase. In general, the younger and the healthier you are, the lower your premium.

The next crucial factor is the length of coverage — a shorter duration will usually have a lower price than longer terms. Use this term life insurance rates chart to compare costs:

Term Life Insurance Monthly Rates by Age, Gender, & Policy

However, there are some longer term packages that guarantee your monthly payment will not increase during a certain period of time. For other plans, the company may guarantee you that rates only increase to a certain price and plateau afterwards.

Whole Life Insurance Explained

Whole life is almost the opposite of term life insurance since permanent policies guarantee protection for the policyholder’s entire lifetime or to the maturity date of the plan from the day the plan is activated.

There are four main categories of permanent life insurance, but all types of coverage last for your entire lifetime unless you default on your premium payments.

• Traditional Whole Life: You pay a fixed amount of premium and your beneficiaries will receive the guaranteed death benefit as long as you keep paying the monthly fee. Costs don’t increase and your coverage won’t change over the years.
• Variable Whole Life: The same as traditional whole life but customers can choose to put the cash value into an investment portfolio account managed by the provider. Earnings can then be used to either lower your monthly cost or added to the death benefit payout.
• Universal Whole Life: This provides policyholders with the most flexibility, allowing you to increase your payout amount as long as you pass a medical examination to prove your health has not changed since the initial agreement. The cash value account can also be applied to death benefits or plan premiums.
• Variable Universal Whole Life: These plans combine features to give you maximum flexibility. You will be allowed to make changes in death benefits and use the savings for investment, lowering premiums, skipping payments, or put it towards a higher payout for your beneficiaries.
• Guaranteed Whole Life: This plan only covers burial and funeral services. Guaranteed packages don’t require medical exams but come at a higher premium cost. If you’re healthy, you may as well go through with the physical exam and enjoy a better rate.

You may also opt for survivorship life insurance. This type of whole life plan is used to cover two lives with one policy. It’s best for spouses where if one person passes away, the other will receive the death benefits. It is an affordable alternative for insuring two people at the same time without buying two separate policies.

Read More: Prudential Insurance Review

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Whole vs. Term Group Life Insurance Options

Certain companies offer their employees a chance to buy life insurance under a group plan for a discounted rate, and employers can chip in and cover premiums as part of the worker benefits. Here’s a closer look at the types of whole vs. term life insurance available with most group plans:

Whole vs. Term Life Insurance Comparison Chart

For group plans, a physical examination is usually not needed. And the best states for employer-provided insurance mandate that employees have the right to convert term life into permanent policies once the existing group policy reaches the termination date.

Whole vs. Term Life Insurance Accelerated Death Benefits (ADB)

This optional add-on feature allows the policyholder to finance what health insurance won’t cover. In order to qualify for ADB, you must be diagnosed with an:

• Acute Illness: Includes severe heart diseases, HIV, hepatitis B, and hepatitis C
• Terminal Illness: Any illnesses with a life expectancy of less than 24 months
• Catastrophic Illness: Includes leukemia, heart attack, stroke, or any illnesses that require extreme treatments such as organ transplant or amputation

As medical treatments and hospital stays can be extremely expensive, even with health insurance benefits, some individuals have the option to use part of the death benefits. You can it take out as a cash advance against the payout for treating a terminal illness. Depending on the company and on the packages, some plans already come with this benefit whereas others require a small add-on fee.

No company can cancel your plan if you develop an illness, but you won’t get accelerated benefits if you didn’t add this rider to your whole or term life policy.

How much does an accelerated death benefits rider pay out?  The actual sum depends on your company, policy value, state regulations, and the contract terms.

Also note that the withdrawal method can also differ based on the company’s regulations. For some, they may pay out as monthly stipends, others will pay in a lump sum, and there will also be ones who will allow you to choose.

If any company attempts to deny you coverage in this circumstances, contact your state’s agency and report of such activity.

How to Save Money on Whole vs. Term Life Insurance Costs

Medical history will impact your life insurance rates. For instance, an anxiety and life insurance quotes comparison can get expensive if you have a long history of prescriptions or involuntary treatments.

Fortunately, there are many ways to save money on life insurance regardless of the type of plan you choose. Consider these tips as you compare plans:

• Switch Up: If you want a permanent plan but cannot afford one in your current financial status, we recommended adding a conversion or return-of-premium add-on to term life insurance to protect your investment in case you outlive the policy.
• Bundle Up: If your provider offers other type of insurance (e.g. auto, home, business, health), consider bundling up your coverage plans for a discount deal.
• Ditch Dangerous Hobbies: This is the time when you get rewarded for being “normal”. By having a relatively safe lifestyle and hobbies will allow you to get a better price on your life coverage.
• Pay Annually: Usually companies will give you a discount by paying your premium annually in one lump sum. Throughout the years, if you continuously take 10 to 20% off your annual premium, that can really add up if you have a high value plan.
• Annual Reviews: A lot can happen every year. Your income can double, your family can grow, and your family expenses can change. Review your financial needs and rethink whether the policy still covers your needs and purposes.

You’ll also find better rates when you go with more local companies. Because they have less company expenses, they will have a friendlier price for their packages. Find more tips in our expert guide on how to save money on car insurance.

Many people often recommend that term policies are the better choice because it is much more affordable. However, the best way to choose between whole vs. term life insurance is to ask yourself three important questions:

• What is your current financial situation?
• What exactly are you trying to protect? (e.g. your home mortgage, children’s tuition, accumulated wealth)
• Do you own or run a business?

Preparing Your Whole vs. Term Life Insurance Application

The average monthly cost of whole vs. term life insurance coverage is a reflection of your risk as a policyholder. Each company has its own chart to assess how likely it will need to payout for individuals who share specific risk factors (e.g. tobacco usage, age, family history, etc.). The five most important factors impacting life insurance rates are:

• Age: Cheap life insurance is reserved for young policyholders with a long life expectancy. Life insurance quotes start to go up after you turn 40.
• Gender: The average life expectancy for females is 81.2 years and males is 76.4 years. Based on these statistics, men are much more likely to file a claim than women and charged higher rates.
• Health History: If you or your immediate family members have a history of certain illnesses such as cancer, cardiovascular-related diseases, or diabetes, your rate may be higher. Having a previous health history can actually make insurers deny your application.
• Tobacco Use: As medical studies have shown, tobacco usage is the leading cause to various illnesses. Life insurance companies view smoking as a sign of early death and charger higher rates for smokers.
• Value of the Policy: How much you want as your death benefit dictates how much you will have to pay. Obviously the higher the death benefit, the more expensive the plan.

What happens if you’re denied life insurance coverage? If you receive this news, contact the provider to find out the exact reasons for the application rejection. Under the state regulations, you have the right to know this information in specific written form.

You should also request a copy of the physical exam records used by the provider to access your eligibility. Go through this information and consult a second opinion as the results can be wrong. If you believe the company made a mistake, or you wish to clarify of the circumstances, ask for a reconsideration by providing additional information or further physical exams.

Even if the provider doesn’t allow reconsideration, you should still contact them and explain that the results in the database are incorrect so that other companies don’t receive the same information and turn you down as well. If you do decide to apply with another company, let them know of the error from the previous application.

Read More: Everything You Need to Know About Pacific Life Insurance

Most Common Reasons Why Life Insurance Applications are Rejected

As long as you are labeled as a high-risk customer, an insurer may choose to turn down your application just to be safe. Here are the top six reasons for a life insurance rejection:

• Elevated Cholesterol and Obesity: This combination points towards early onset of cardiovascular diseases, stroke, and death.
• Abnormal Liver Function. Because liver diseases are often deadly, companies will assume the worst and reject your application.
• Risky Occupation: Some providers deny coverage for people with certain high-risk jobs. If you need construction, mining, or commercial fishermen life insurance quotes, anticipate them to be higher.
• History of Cancer: Your insurer is more likely to cover you if you suffered from minor cancer, such as skin cancer, but with more serious forms, like liver cancer or breast cancer, the chances of being accepted are very unlikely.
• History of Being Declined: If you’ve been rejected by insurance companies before, it doesn’t mean you can never get a life protection plan ever again, it only means that the process may become harder.

Have you received any traffic tickets recently or any incidents of DUI? Did you ever have your license revoked? Occasional traffic tickets may not affect a whole or term life insurance quote, but serious offenses such as a DUI will make you a higher-risk customer.

Dangerous hobbies can make shopping for life insurance quotes for skydiving, scuba diving, or rock climbing more expensive. Do you own high-end luxury race cars? Race car driver term life insurance quotes will also be higher than average due to the increased risk. 

Take advantage of free-look periods to save money on life insurance. This free-look period allows new subscribers to reassess and refund their purchases. This period differs from state to state (usually 10 to 15 days), and if you do decide to cancel the plan within this time limit, your insurer must refund you the whole purchase without keeping any amount.

Tips to Get Your Life Insurance Application Approved

The simplest thing you can do to lower life insurance costs is to start exercising and eating healthy — having a healthy weight and body mass index (BMI) can drastically decrease your premium.

In addition, providers will view you as low risk and reward you with lower rates if you have a normal glucose range and blood pressure. Learn more in our millennial’s guide to health insurance.

Instead of going through the whole process just to be rejected based on a curable physical problem, get a medical routine checkup and find out ahead of time. This will not only make your application more straightforward but also even lower your rate. And some providers are known to be more lenient with certain risk factors than others, so shop around to see which company will give you the best deal.

For example, if you smoke, it can save you some money by quitting now. By telling your provider that you’ve quit smoking for even just one year can lower your premium. And the longer you’ve been a non-smoker, the greater the savings.

How to Claim Whole vs. Term Life Insurance

After the policyholder passes on, their heirs can file a life insurance claim by submitting a certified death certificate to the company.  A provider can decide to pay it, request further information, or deny the claim. If a claim is denied, the company will send a written letter to the beneficiaries explaining the reason for the rejection.

State laws vary, but companies typically have 30-60 days to process the claim. Learn more about which are the worst states for filing an insurance claim.

There are a number of reasons why an insurer can delay the payment of death benefits. Here are the most common situations:

• Contestability Periods: If you pass away within the first two years of your plan, the insurance company will have the right to check all the information as written in your application. If it cannot prove any fraud, the company must pay, but the investigation can delay payment up to 12 months.
• Dangerous Activities: Your policy is likely to list excluded dangerous activities (e.g. skydiving, paragliding, scuba diving, driving a race car, rock climbing). If you do unfortunately die while engaging in one of these activities, your family will not receive any death benefits or refund of premiums paid.
• Failure to Disclose: Insurers have the right to deny your claim if you intentionally omit important information from your medical exam or life insurance application, including not disclosing a DUI record, smoking habit, pre-existing condition, or even owning a race car.

Traditionally, death benefits are in one payment, but some providers may offer an installment payment method. If you choose installments, you will have the right to decide how the money will be paid out to your beneficiaries.

Always keep your contract and other paperwork in a safe place. If your beneficiaries cannot find your policy and contract, it will make the claiming process much harder.

If you keep the plan a secret, your heirs will never know until they come across the paperwork. Under state law, a company is legally bound to find your beneficiaries and proceed with the payout, but providers tend not to and leave heirs to fend for themselves.

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How to Cancel Whole vs. Term Life Insurance

Why would you want to cancel life insurance and sell your policy? Here are the top reasons why someone may want to terminate life insurance coverage:

• The policyholder’s financial status changed and can no longer afford the premium.
• The coverage is no longer necessary (e.g. client no longer need to worry about their spouse as the children now can take care of the parent, the children no longer need the coverage as they are now self-sufficient financially)
• Couples make a purchase on a policy. Years after they have a divorce, and the paying party no longer want to continue with the payment.

Even if you decide that you no longer need the coverage, you should consult with the intended benefit receiver. Ask them if they would like to keep the package and pick up the premium payments. This is often a better way to utilize the plan as an investment instead of recouping your money through selling the contract.

If you have purchased a whole life package and no longer consider it a need, do not terminate the plan immediately. There are several other options you can choose depending on why you no longer want this contract:

• If you need quick cash, you can actually take out a loan against the policy to a third party loan company.
• If you are terminally ill, you can take out an advancement from the death benefit for the time being.
• If you no longer see the purpose in the contract, you can also consult with your beneficiary if they wish to take over the payments.

In general, these alternatives tend to be better than allowing the agreement to simply go to waste. You also have the option to sell the contract to the third party policy investor. This transaction is called a life settlement.

Read More: Mutual of Omaha Insurance Review

Whole vs. Term Life Insurance Settlements

In order to qualify for this option, you must be 65 years or older and in relatively good health. Almost all types of coverage are eligible: term, permanent, universal, variable, and survivorship life policies. In addition, you must have the plan for at least two years (or the length of your contestability clause).

Quite interestingly enough, the selling process is the opposite of buying process where you score a better deal the younger you buy. In this scenario, the older you are and the shorter your life expectancy, the more valuable your portfolio will become.

You, as the owner, will receive an agreed upon cash payment in exchange of transferring your ownership of the policy to the investor. The investor will continue to pay for your premium until your death and collect the death benefits as your beneficiary.

Currently, there are no settlement exchange market in the United States. Most transactions are done in private dealings between buyers and sellers regulated between two parties of brokers similar to real estate trades. However, the seller and buyer can also opt to represent themselves in the trade.

Learn More: The Ultimate Insurance Cheat Sheet

Life Insurance Settlement Process

You’ll have the option to go with a broker and provider. Brokers function as a representative on your behalf to settle price and terms with an investor buyer. You also have the option to work directly with a provider and benefit from the omission of the commission fee.

Usually when you notify your provider, you’ll sit down with a financial advisor to go over your portfolio and all the options available. Unlike a broker and provider, a financial advisor has your best interest as their priority.

If you do decide to go ahead with the deal, here is a summary of how the settlement will proceed:

• Inquiry: You should meet with several brokers and decide on one to work with. A professional broker should never intimidate or pressure to choose one offer over another. There is a transactional fee on top of any settlement case, and they should also disclose this information up front.
• Application: You need to fill out an application for the sale before the broker can send your information to different providers. They shouldn’t send any information without requesting your permission, so attain a full privacy procedure from any broker before handing over personal medical information.
• Evaluation: Your broker and financial advisor will go over all the offers you receive to make sure you understand the contract in each. You will a limited amount of time to consider all offers ( usually 30 days).
• Settlement: The provider will send back a transfer contract and closing package that contains all the necessary documents to seal the deal. Your broker will go over the documents with you, and your advisor should also be in there to consult you of any concerns or sketchy statements.
• Escrow: Once you sign all the forms, your broker will submit all the paperwork to an escrow agent for safekeeping. After the provider receives the paperwork and release the funds to the escrow agent. The agent will then transfer the funds into your bank account to complete the whole process.

Although viatical settlements and life settlements are similar, there is one very important difference between the two transactions:

• Viatical Settlements: Apply to policyholders suffering from terminal illnesses and have a life expectancy of less than two years
• Life Settlements: Involve sellers who do not have any terminal illnesses and are reasonably healthy.

Please note that there are different state and federal regulations concerning these two types of transactions. Also remember that settlement payouts are different from death benefits in that it is regarded as income and taxable. The sudden influx of money can affect your eligibility to certain public assistance programs such as Medicaid. If you have any uncertainty, you should consult with your lawyer, accountant, or any other financial aid.

Why You Need Whole vs. Term Life Insurance Coverage

The differences between whole vs. term life insurance are in the cost and policy length. Both types of life coverage plans ensure that the policy reimbursement will be used to pay the estate taxes so that your family will not have owe any money to the government.

The #1 reason people buy life insurance is to ensure that, in the sudden event of their passing, their loved ones (e.g. spouse, children, and other dependents) will be left with a solid financial foundation to sustain their lifestyle. If you’re a business owner, family members won’t be the only ones affected by your death.

If you aren’t convinced to buy life insurance yet, consider that whole and term life insurance can protect both your family and your business from financial hardship by paying off debts and supplementing investment portfolios.

If you have any trouble understand the terms in the contract, do not hesitate to have a lawyer read over the details. If you are purchasing permanent life, you definitely should consult with an expert about how to set up your cash value and investment portfolio in the early years to maximize financial growth and benefits.

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Whole vs. Term Life Insurance Essential Terms

Arrears

The coverage is defined as ‘arrears’ if the subscriber has missed at least 1 payment.

Accidental Death Benefit

An option that will be put in place to give you some financial protection in case of accidental death.

Accelerated Death Benefits

If you are diagnosed with a serious illness (which must be included in the contract guideline), this clause allows you to take out a lump sum from the death benefits to be used as treatment and living expenses.

Beneficiary

The person or a group of people identified by the insured as the receiver of the death benefits.

Claim

A request was made to the insurance provider for the cash benefit of a life insurance policy to be paid out.

Death Benefit 

The cash payout, as stated in the contract, will be given to the beneficiaries in the event of the holder’s death, and a claim has been successfully submitted and approved.

Decreasing Term Insurance

This is a type of term life insurance that deprecates in death benefits annually. It is usually used as a cover for protecting the mortgage on a home, a loan on a company, or annual children’s tuition cost.

Declined Risk

It is a term an insurer uses to reject an application because the applicant does not meet the acceptance criteria.

Dependent

An individual who relies on the policyholder for financial support.

Existing Medical Condition

Any health condition, diseases, or illnesses that the applicant is already suffering from before they submit their application.

Estate

It defines the amount of net worth the subscriber values at the time of their death. This includes all assets, including possessions, properties, investments, savings, and life insurance policies they own, minus their debts such as loans and mortgages.

Guaranteed Premiums

This means that your premium is guaranteed to remain the same throughout the policy term. Remember that once the term is over, the premium can increase significantly.

Guaranteed Insurability Option

This feature lets you increase the value of your life cover without having to provide any further medical evidence to the insurance provider.

In Force

It means that the policy is effective.

Inflation

It defines the price upsurge over time due to the increased cost of living.

Life Insured

The name of the policyholder.

Level Term Insurance

This means that the premium and death benefits remain the same throughout the contract.

Lapsed

The status of a policy when the subscriber does not pay the fees on time and during the grace period.

Monthly Premium

This is the agreed amount of money the subscriber must pay to keep the plan in force.

Non-Disclosure

When an applicant does not provide important pivotal information that the insurer uses to decide on the application approval and the cost.

Policy

A contract between a subscriber and the insurance provider.

Policy Schedule

A crucial piece of document that confirms all details concerning the policy. The information includes the subscriber’s personal information, health records, coverage details, limitations and exclusion clauses, beneficiary names, and death benefit amount.

Policy End Date

The day, as stated in the policy schedule, defines the end of the coverage.

Smoker Rates

The rating scale is applied to candidates who currently use tobacco or have a history of using tobacco recently (within 10 years of the application). This rate tends to be at least 20% higher than non-smoker candidates.

Term

The specified length of time of which a policy remains in force.

Term Life Insurance

Type of plan that covers the subscriber within a specified amount of time as agreed between the subscriber and the provider. If the policyholder dies within this time, the company will honor the agreement and pay out the death benefit to the heirs.

Terminal Illness Cover

This is a form of cash advancement available to subscribers who have been diagnosed with a terminal illness and a life expectancy of less than 24 months. It allows the individual to take out a percentage of the death benefits and use it towards treatment and living expenses. This amount is non-taxable and does not need to be paid back. However, the beneficiaries will receive a lesser amount of the benefit if the subscriber does pass away within the effective term period.

Underwriter

An individual at the insurance company specializes in calculating the risk factors, life expectancies of applicants, and the rate according to the risk charts.

Underwrite

An assessment on whether an applicant is a high-risk or low-risk customer, their life expectancy based on their health and other risk factors, and the rate at which the applicant should receive.

Waiver of Premium

This is an add-on feature that pays for your premium when you are hurt in an accident or illness, which prevents you from working and making the payments.