Term Life Insurance & Whole Life Insurance Explained

Heart monitor screenRecent research has found that nearly three quarters of adults don’t have any life insurance. As a nation we are reluctant to talk about death and the subject remains something of a conversational taboo. Given that we don’t want to ‘think about the unthinkable’ it’s hardly surprising that such a small percentage of the population is covered. What is much more surprising is the fact that over 60% of life insurance claims are made by people aged 40-60 and the figure rises to 70% for critical illness claims.

While we may not want to contemplate our own mortality the figures show the importance of planning for the worst and planning early. Today life insurance policies can be tailored to fit your individual needs, but loosely fall into two categories: Term Life Insurance and Whole Life Insurance.

Term Life Insurance Pays an agreed sum if the policyholder dies during a particular period of time; usually somewhere between 10-30 years. Once the ‘term’ expires the policy also expires and there is no final death benefit. Level Term Life Insurance pays a fixed lump sum for the duration of the policy, while Decreasing Term Life Insurance payouts shrink to reflect outstanding mortgage debt. Premiums are affordable and the product is straightforward and simple to understand.

Whole Life Insurance Formally known as ‘Whole Life Assurance’ cover spans the policyholder’s entire life and a payout is guaranteed. Premiums are typically paid for the duration of the policy and payouts depend on how well the underlying investment vehicles perform. Whereas Term Life Insurance is primarily designed to safeguard against unexpected loss; Whole Life Insurance is more commonly used for financial and estate planning.

Critical Illness Insurance Provides a lump sum if the policyholder is diagnosed with a critical illness (such as cancer, heart disease or stroke) and can be purchased as a stand-alone product or added to a life insurance policy. Critical Illness Insurance is not to be confused with Medical Insurance which is designed to cover the cost of treatment.

While you can’t choose your future you can make sure that you are financially prepared. Life Insurance provides financial peace of mind for you and your loved ones should the worst happen. Deciding on the right type of cover (and the right level of cover) can be complicated and that’s why it’s important to find a broker who you can trust and who speaks your language.


Leave a Reply