Knowing the difference between individual life insurance options can help you guide your employees to choose the right policy for their life situation. Though there are few differences between term life and whole life policies, those differences can have a financial impact on your employees.

Term Life Insurance*,**

For individuals on a smaller budget, term life insurance can be beneficial because of high coverage amounts for the term purchased and lower premiums compared to whole life policies. As the name suggests, a term life insurance policy is intended to provide financial protection for a specific period of time. Often, term life insurance policies are purchased to help during wage-earning years because expenses are usually at their highest during this time. For example, if one of your employees has children in the house and they are paying for college or other debt, having a term life insurance policy can help cover these payments in the case of their death.

Many term policies include 10, 20 or 30 year terms. Once the term is over, many policies are “guaranteed renewable,” which means policyholders are automatically approved to renew for an additional term without being subject to additional medical questions. However, term life insurance premium rates are only guaranteed for the term of the policy. So if employees choose to renew, their premium rates will be based on their age of issue at the time of the new term. Why people choose term policies:

  • Lower premiums
  • Higher coverage amounts for term periods

Things to consider:

  • Policy ends when the term ends
  • No cash value
  • Rates will probably increase for each new term

Whole Life*,**

Whole life insurance policies may offer protection for life up to age 121, and accumulate cash value. Generally, whole life premiums are higher than term life policy premiums, but whole life policies offer financial benefits that term life policies do not offer. Specifically, the cash value benefit of a whole life policy can be very attractive. Because employees will receive the cash value of their policy at age 121, or at any time when a cash surrender is requested, employees may feel more satisfied with their financial investment.

For AFA’s whole life policy, premiums are determined by the initial issue age and will stay the same throughout the insured’s whole life. So, the earlier your employees purchase these policies, the lower their premiums can be for life. In contrast, with a term policy, premiums will increase when applying for a new term later in life.

Life Insurance Premiums

Another helpful benefit of a whole life policy, specifically American Fidelity’s Whole Life Insurance, is a Reduced Paid-Up Provision. This provision allows employees to stop paying premiums at any time, while still providing coverage at a reduced benefit amount. Why people choose whole life policies:

  • Coverage for life
  • Cash value
  • Guaranteed premium rates for life

Things to consider:

  • Higher initial premiums compared to term life policies

Having Both

Your employees can also purchase both types of life insurance to help provide additional coverage. This helps employees maximize the length of time and the amount of coverage they have.

Updated American Fidelity Life Insurance Plans

To make it even easier for your employees to obtain the coverage they need, American Fidelity has recently updated our life insurance applications to have fewer health questions. We have also added extended coverage and additional benefits for your employees. Learn more about our life insurance product update on the blog.

Consider a Life Insurance Checkup

American Fidelity Assurance Company can assist you and your employees in running a ‘checkup’ to make sure they have the right amount of coverage to meet their specific needs. It’s a very important tool, as it helps them determine the level of coverage they need, yet it’s often overlooked. Download this flyer to see how we can help, or contact your American Fidelity representative.  

*These products may contain limitations, exclusions and waiting periods.
**Not generally qualified benefits under Section 125 Plans.