Life Insurance FAQs

How are term life insurance and whole life insurance different? What are the different kinds of whole life insurance available? Can I, or do I need to, purchase more than one life insurance policy? Why does my insurance company require a medical examination before issuing a policy? Should I buy a life insurance policy when I am young? These questions will be answered below.

How are term life insurance and whole life insurance (also called permanent life insurance) different? Term life insurance is the most basic form of life insurance. As implied in the title, it offers life insurance for a specific term of time, anywhere from one to thirty years. Older people usually buy a term life insurance policy with the length of the term being determined by their age. When a person dies within the term specified in the insurance policy, the insurance will pay the benefits to the insured’s beneficiaries. Whole life insurance is usually bought by younger people because they typically have a longer life expectancy when they purchase the policy. With whole life insurance, the insurance company will pay benefits whenever the insured individual dies.

What kinds of whole life insurance are available? There are three types of whole life insurance. They are traditional whole life insurance, universal whole life insurance, and variable whole life insurance. Under a traditional whole life insurance policy, the insured will pay the same premium throughout their entire life. When the insured individual dies, the balance of the policy is paid to the beneficiaries of the whole life insurance policy. Universal whole life insurance plans have flexible premiums that go up and down throughout the lifetime of the insured. Variable whole life insurance plans, like the traditional whole life insurance plan, has regular premiums. However, unlike the traditional whole life insurance plan, variable whole life insurance plans also offer investing options. Within each of these plans there are variations, one of which includes a plan that can be bought for one lump sum.

Should I buy more than one life insurance policy? With medical costs and burial expenses on the rise, it is quite common for one person to hold more than one life insurance policy. Some people might consider such coverage to be excessive, but it is really a personal decision for the policy holder to make. Typically, a person would have a life insurance policy in a set amount and purchase supplemental life insurance policies to cover anticipated expenses. To protect their interests, insurance companies may ask for a medical examination before agreeing to provide a supplemental policy. This is to assure the insurance company that there is no known life threatening medical conditions that might cause the insured to die shortly after purchasing a supplemental policy.

Why is a medical examination required to purchase a life insurance policy? Insurance companies need to protect themselves by weighing the risks against the rewards of insuring a person. A medical examination can provide information on a potential insured’s past medical history as well as their current medical situation. If a person has a long history of physical problems or has been diagnosed with several different illnesses, the insurance company will most likely not approve a policy for that person. They may also offer to insure the person at a higher rate.

Should I buy life insurance when I am young? The quick answer is yes. When you are young, you are generally in good shape and you will get a much better premium rate. The older you are, the higher the premium becomes and it is harder to lock in a low premium as you age. Again, this is a personal decision. While most insurance companies will give better rates to the young because of a longer life expectancy, some people are comfortable waiting while others prefer to buy life insurance at a young age because it gives them a sense of peace.