Term Insurance 定期壽險
Term insurance gives cover for a set period only, such as 10 or 20 years, or up to a stated age. If the life insured dies within that period, the insurer pays the sum insured. If the life insured survives to the end, cover ends and normally nothing is payable.
It is pure protection and generally has no cash value. For the same age and sum insured, its premium is usually the lowest of the three traditional types. This suits people on a limited budget who need a large amount of cover for a short or defined period, such as a breadwinner whose children are not yet independent.
Under level term insurance the sum insured stays the same throughout. Under decreasing term insurance it falls over time, which is why it is commonly used for mortgage protection: the cover broadly follows the outstanding loan. Under increasing term insurance it rises on an agreed basis, which helps offset some of the effect of inflation.
Renewable term insurance lets the policyholder renew at expiry without further evidence of insurability, but the renewal premium is usually based on the age at renewal and so is higher. Convertible term insurance lets the policyholder change, within an agreed period, to a longer-term policy such as whole life or endowment, again without further evidence of insurability. This is especially valuable if the life insured's health has worsened.
Endowment Insurance 儲蓄壽險
Endowment insurance combines protection with savings. The insurer pays the sum insured if the life insured dies during the term, or if the life insured survives to maturity. Only one of these can happen, so the basic sum insured is paid once and the policy then ends.
It can be understood as term insurance combined with a pure endowment. Note that a pure endowment pays the sum insured only if the life insured survives to maturity and does not pay it on death during the term, which is what sets it apart from an ordinary endowment.
Because the insurer is certain to make a payment, either during the term or at maturity, endowment premiums are usually the highest of the three traditional types, and a shorter term generally means a higher premium. The policy builds up cash value and normally has a surrender value after premiums have been paid for some time, but early surrender may return far less than the premiums paid.
Endowment insurance suits financial goals with a clear timetable, such as children's education or retirement savings. It may also be issued on a participating basis, giving the policyholder the chance of non-guaranteed bonuses or dividends.
Whole Life Insurance 終身壽險
Whole life insurance has no fixed term. As long as the policy stays in force, the insurer pays the sum insured whenever the life insured dies. Some policies set a stated age, such as 100, at which the sum insured is paid if the life insured is still alive.
Under ordinary whole life, premiums are payable until death or a high age stated in the policy. Under limited-payment whole life, premiums are payable only for a set period, such as 20 years or up to age 65, and cover continues after that. Under single-premium whole life, the premium is paid in one lump sum. For the same sum insured and age at entry, the shorter the payment period, the higher each premium.
Where premiums are level, those paid in the early years exceed the cost of the mortality risk at that time, so the policy gradually builds up cash value. The policyholder may surrender the policy for its surrender value or, where the terms allow, take a policy loan against the cash value. The policy can also be assigned, for example to a bank as security for a loan.
Whole life insurance suits long-term or lifelong needs, such as leaving a legacy for the family or meeting expenses after death. Its premium is usually higher than that of term insurance for the same sum insured but lower than that of an endowment of similar length. Like endowment insurance, it can be issued on a participating or non-participating basis.
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