Difference Between Term Life & Whole Life insurance Plans
Ever wonder the difference between a term life plan and a whole life plan? We’ll clarify it here.
The first thing you need to know is that both term life and whole life plans are insurance protection plans — they reward your beneficiaries with a pre-agreed amount if loss of life occurs. This does two things for you:
- It puts your mind at ease and helps you focus on the moment (knowing your loved ones are well provided for).
- It ensures your loved ones achieve their dreams and carry on with life without any hardship.
Awesome, right?
That said, there are slight differences between both plans which are explained below:
The Term Life Plan (or Term Assure Plan)
A Term Life protection plan is usually taken for a short period, typically 1 to 10 years. You can take this plan for just a year, simply by paying 1% of your intended benefit amount as the premium. This means, if you want N1,000,000 for your beneficiary, you need only pay N10,000 to secure this for them.
And because of their short duration, premiums are paid annually or as a single sum for the years you want to cover.
Many young couples and travelling businessmen tend to favour a term life plan. And in all cases, the only condition to make a claim is when loss of life occurs.
The Whole Life Plan
Unlike term life, an insurance Whole Life plan spans a longer duration. Premiums can be paid quarterly, annually or as a single payment.
Because of their longer duration, whole-life plans cost slightly more than term plans. And premiums are uniquely calculated based on conditions like the age and lifestyle of the person taking them. Usually, the younger you are, the lower the premium.
Most whole life plans usually span the lifetime of the person taking them. You will usually continue to pay a specific, calculated amount as long as you live so that when the inevitable happens, you leave a pre-agreed inheritance for your loved ones. This is known as the Unlimited Whole Life Plan.
However, there is the Limited Whole Life Plan which terminates after a duration of 10, 20, 30 or more years, depending on the unique request of the customer.
Many older people tend to favour a whole life plan. They want to leave a defined inheritance for their loved ones and don’t mind paying a simple amount once a year to secure this.
The important thing to remember is that both plans guarantee some benefit for loved ones if loss of life occurs. And the difference lies in the cost, duration, and intended purpose.
Finally, note that deaths from suicide, wars, and self-inflicted injuries are usually excluded from insurance protection coverage. You can learn more about the exclusions of an insurance plan by reading the terms and conditions of your insurance contract or by clicking here.
