Are there differences between term and whole life insurance based on health?
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Asked September 20, 2013
Term life insurance is purchased to cover you against the possibility of death for a specific number of years, while whole life policies remain in effect for your entire life, as long as the premiums are paid up. Term and whole life insurance policies work best for a different set of circumstances, and both are affected by your current and past health records. The reason your health affects life insurance is a simple one: your health influences the quality and longevity of your life. As your health deteriorates, the amount you would have to pay to purchase a life insurance policy will increase until the risk is so high that traditional insurers will not underwrite the policy at all.
Life insurance is more costly for people with preexisting health conditions, regardless of whether you are trying to get term or whole life coverage. Term life policies are more likely to have higher increases based on health temporary health conditions, because the whole life policy is focused on your entire life and minor health fluctuations are expected.
For those with serious or terminal health conditions, the only life insurance option available may be final expense coverage which can be purchased without a medical exam. Final expense insurance, sometimes called funeral insurance, has the lowest rates of any whole life policy, but it is also the most restrictive in how the policy settles. Final expense policies typically pay directly to a funeral parlor which has agreed to handle your final needs. If your intention is to bequeath financial assistance to your loved ones, this type of policy will not be useful.
For those in perfect health, a term life policy is probably the most economical. Term life insurance favors the insurance company because it is common for people to pay the premiums for the length of the policy and then lose their investment. You will still get lower rates on whole life policies if you are in perfect health, but such policies will cost you more over the course of the policy.
Answered September 20, 2013 by Anonymous