Insurance

Difference Between Instant Issue Term Life And Whole Life Insurance

As it is rightly said, “Change is the only constant in life”. Keeping that in mind, Insurance Companies have devised different kinds of Instant Life Insurance Policies to cater our day-to-day varying needs.

Therefore, Instant Issue Life Insurance can be broadly categorized in the following two types:

1) Instant Issue Term Life Insurance: Also known as the Pure Life Insurance, it has an end date associated. Further, it costs considerably less than the Instant Issue Permanent Insurance as the premium remains constant throughout the decided term. It provides security to the beneficiaries for a certain time period i.e. in cases the insurer dies within the specified period of the policy (this period can be chosen at the time of buying). Most companies issue an instant 10, 20 or a 30 year Term Insurance Policy. Needless to say, it is immensely significant to decide on the Term wisely as the death benefit will be a substitute of your income when protection needs of your beneficiary are the highest.

2) Instant Issue Permanent Insurance: Offering supplementary ‘living benefits’, Permanent Insurance allows both, the insurer and his/her beneficiaries to enjoy added protection with perpetual coverage. Basically, an ‘Investment Component’ referred as the policy’s ‘Cash Value’ also tags along this type which keeps expanding at a guaranteed rate. As obvious, it is priced higher than the Term Insurance. There are a lot of different kinds of Instant Issue  Permanent Life Insurance; Whole, Universal, Variable and Variable Universal to name a few. However, Whole Life Insurance is the most popular amongst all. Opportunities to amass dividends also emerge frequently in Whole life Insurance (not mandatory though) which can be treated as the Insurer’s financial surplus. This dividend can be claimed against cash, redirected for investment to gain interest or utilized to pay premium. In a nutshell, providing life-long protection, Instant Issue Whole Life Insurance is often regarded as the best long-term solution. However, once approved for coverage, this policy cannot be reverted or annulled by the carrier irrespective of his/her health- as long as premiums are paid when due, it will remain intact.

Whole Life Insurance

Difference Between Instant Issue Term Life and Whole Life

We have formulated the following table to give our readers a clear picture by highlighting the differences between Instant Issue Term Life and Whole Life Insurance.

A) Instant Issue Term Life Insurance

 

B) Instant Issue Whole Life Insurance

 

1) It guarantees death benefit over a certain period of time

 

1) It provides permanent (forever) death benefit.

 

2) It is relatively cheaper. Therefore, ideal for those who can’t afford the permanent one.

 

2) It is relatively expensive due to the inflated premium charged
3) Premiums rise at predetermined intervals as per the purchased policy that can vary from a year to five, ten or even twenty years.

 

3) Premium remains constant throughout the life of the policy i.e. as long as you live.

 

4) It has absolutely no cash value accumulation. 4) The cash value account builds at a guaranteed rate as cash accumulates with the passage of time. This can then be claimed through policy loans or partial surrenders.

 

5) It is usually sought when you foresee it as a means of your income replacement during high-need years for example, in the crucial stages of child rearing or paying off your mortgage.

 

 

5) Its a product of your choice mostly when you have a lifelong beneficiary like a child with special needs, or you wish your heirs to have income to pay off their future loans or estate taxes or, to even equalize inheritance.

 

 

The Bottom-Line

Regardless of these differences, death benefits warranted from either of the instant issue life insurance policies are generally Federal Income Tax-Free. The best part is yet to come! At any given point, you have the valuable privilege to convert your Term Life Insurance to the Whole Life one, debarring any medical underwriting in majority of the companies. This enables the potential supplementary cash growth of your policy value through dividends.