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We’re hoping the following information will provide you with some basic answers so you have a better understanding of the differences between Term Life, Whole Life Insurance, and Universal Life Insurance. Many people can’t explain the difference between Term Life, Whole Life Insurance, and Universal Life Insurance. We want you to understand so that you can pick the policy that is right for you.
TERM LIFE INSURANCE
What Is Term Life Insurance?
Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate.
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PERMANENT LIFE INSURANCE
There are two common types of permanent life insurance policies, Whole Life, and Universal Life. Differentiating the key aspects between Whole Life, and Universal Life insurance can sometimes be difficult. Since both provide a financial benefit to your beneficiaries when you die, how do you decide which policy is the best choice for you? For example, do they both offer cash value that may increase over time? Is one typically more expensive than the other? What are the main differences between whole life insurance and universal life insurance?
What is Whole Life insurance?
Whole Life insurance policies have a fixed premium, meaning you pay the same amount each and every year for your coverage. Much like Universal Life insurance, Whole Life has the potential to accumulate cash value over time, creating an amount that you may be able to borrow against. A whole life insurance policy can be described as providing life insurance protection with an accumulation feature, and might be a good choice if you want a policy with:
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Level premiums that stay the same for the life of the policy
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Cash value accumulation that you can use while you’re still alive
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Protection that you can’t outlive as long as your required premium payments are maintained
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What is Final Expense Life insurance?
Final expense insurance is a whole life insurance policy that has a small death benefit and is easier to get approved for. Final expense insurance is also called “funeral insurance,” “burial insurance,” “simplified issue whole life insurance,” or “modified whole life insurance.” Final expense life insurance is popular with seniors because of its affordable price, smaller benefit amounts, and emphasis on covering funeral costs.
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What is Universal Life insurance?
Universal life insurance policies offer flexible premiums that may allow you to adjust how much you’ll pay each year by accessing some of the policy’s cash value (though you will need to pay the minimum premium amount or the policy will lapse). Depending on your policy’s potential cash value, it may be used for a premium payment, or be left alone with the potential to accumulate value over time.
Potential growth in a universal life policy will vary based on the specifics of your individual policy, as well as other factors. When you buy a policy, the issuing insurance company establishes a minimum interest crediting rate as outlined in your contract. However, if the insurer’s portfolio earns more than the minimum interest rate, the company may credit the excess interest to your policy. This is why universal life policies have the potential to earn more than a whole life policy some years, while in others they can earn less.
A universal life insurance policy might be a good choice if you want:
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The flexibility to adjust your premiums and coverage amounts
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Cash value that you may be able to borrow from while you’re still alive
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Permanent life insurance protection and access to cash values
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What is Simplified Issue Life insurance?
Simplified issue insurance is a life insurance policy you can be approved for with minimal health questions. This type of insurance is typically geared towards people who need to obtain life insurance right away and/or those who don’t wish to submit to a medical exam.
Simplified issue life insurance is designed to provide a limited amount of life insurance quickly, without the 4-8 week wait typical for conventionally underwritten policies that require a medical exam. With a simplified issue policy, there’s no requirement for a full medical exam, so you can have coverage in days – not weeks or months.
The death benefit payout can range from $5,000 to more than $100,000. The premiums may be higher than a typical term life or even a Whole Life policy. Foregoing a medical exam means underlying health issues can’t be factored in. Since risk is considered higher, the premium will be higher as well.
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What is MIB?
Previously known as the Medical Information Bureau, the MIB is a resource for insurance underwriters to assess risk and evaluate life insurance applications. Insurers use the MIB to learn more about your medical history and past applications. When you apply for life insurance, you go through the underwriting process. This is when the insurance company determines how risky you are to insure based on things like your age, your current health, your medical history, your driving record, and more.
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What is Script Check?
Life insurance companies use Rx reports (aka Script Check) extensively and especially when reviewing large premium, older age applications. The Script Check process provides insight into an applicant’s prescription usage. They may also reveal additional attending physicians that were not revealed by the writing agent. The Script Check allows the user to upload, deploy and run their own scripts as a 24×7 Check.
