4 Differences Between Term and Whole Life Insurance With No Medical Exam

iQuanti: Term and whole life insurance policies with no medical exam are available, helping you get coverage faster while avoiding the inconveniences and invasiveness of the exam. But keep in mind that both policy types differ in several ways. Their specific features and benefits make them better suited for different types of policyholders. Understanding these differences helps you find the best policy for your needs. To that end, this article will dive into four key differences between whole and term life insurance with no medical exam.

1. Temporary vs. lifelong coverage

Term life insurance with no medical exam only lasts for a fixed period. You can usually choose a term length between 10 and 30 years. If your policy expires, you'll need to renew or get a new policy to continue coverage. Whole life insurance with no medical exam, on the other hand, offers lifelong coverage. As long you keep up on premiums, your policy will never expire, offering peace of mind.

2. Premium amounts

Term life insurance charges lower premiums for the same level of coverage as a comparable whole life insurance policy. This is because you can outlive the term life insurance, reducing the insurer's risk. Similarly, whole life insurance costs more because your coverage does not expire.

3. Cash value growth component

Whole life insurance policies with no medical exam come with a cash value growth component you can use as a source of savings. The insurer puts some of each premium you pay into this component, which grows tax-deferred at a fixed interest rate. When your cash value grows large enough, you can tap into it via withdrawals or low-interest-rate loans. If you surrender the policy, your insurer pays you the cash value minus any applicable surrender charges. 

Term life insurance does not have this cash value component. This means you can't build wealth in the same way as you can with a whole life insurance policy.

4. Complexity

Since term life insurance policies expire and have no cash value, they are fairly simple policies to understand. They work well if you want a simple life policy without extra features. On the other hand, the cash value and lifelong coverage of whole life insurance make this policy type more complex. Whole life policies can work better if you're willing to spend extra time reading about and understanding your policy.

The bottom line

Although term and whole life insurance are both available without a medical exam, they have critical differences that suit them for distinct situations. Term life insurance is simpler and more affordable, but it expires and offers no cash value growth component. This type of policy may work best if you're looking purely for coverage and want to minimize your life insurance budget.

Meanwhile, whole life insurance with no medical exam is more complicated and expensive but lasts for a lifetime and comes with cash value. If you have more complex financial needs and want the peace of mind associated with guaranteed lifelong coverage, whole life insurance might be worth the higher cost. Carefully evaluate your circumstances and goals before choosing which of these no-exam policies is best for you.

Source: iQuanti