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Term Life Insurance – Save Money the Smart Way
Term Life Insurance – Save Money the Smart Way
Term life insurance is the easiest type of life insurance to understand. To put it simply, the insured person pays a minimal premium per thousand dollars of coverage on an annual, semi annual, quarterly or monthly basis. If he or she dies within the term of the policy, the life insurance company will pay the beneficiary the face value of the policy.
Distinctive Features of Term Life Insurance
To better understand some of the distinctive features of term life insurance consider the following points:
First, term life insurance is “pure insurance” because when you purchase a term insurance policy you are only buying a “death benefit”. Unlike with other types of “permanent insurance” such as whole life, universal life, and variable universal life, there is no additional cash value built up with this kind of policy. Term insurance only gives you a specific death benefit.
Second, the coverage is for a defined period of time (the “term”) such as 1 year, 5 years, 10 years, 15 years, and so on. Once the policy is in force, it only remains in force until the end of the term — assuming you pay the premiums, of course.
Third, most term insurance policies are renewable at the end of the term. With what is known as “Level Term Life Insurance”, the death benefit remains the same throughout the term of the policy, but since the insured person is getting older, the premium will gradually increase. As time goes by the cost of a level term insurance policy may become greater than you are willing to pay for a simple death benefit. An alternative is the “Decreasing Term Life Insurance” policy in which the premium remains the same, but the death benefit goes down as time goes by.
Fourth, most term policies can be converted to permanent policies within a specific number of years. If you decide it is important to retain the insurance coverage, converting may be something you should plan for. You can anticipate the accelerating cost of term insurance premiums and convert your policy before the premiums become prohibitively high. It is true that in the short term the premium will usually be higher than if you stayed with the term policy. But over the long term this difference will decrease because of the rapid acceleration of the term insurance premium as you get older. A permanent policy also accumulates cash value which increases the total death benefit paid to your beneficiary.
Popular Uses of Term Life Insurance
Term life insurance is most appropriate whenever you want to protect your beneficiaries from a sudden financial burden as the result of your death. Here are some of the most common uses of term life insurance.
Personal Costs Due to Death – When a spouse or family member dies there will be immediate costs. Many people purchase a relatively small term life insurance policy to cover these costs.
Mortgage Insurance – Banks and financial institutions often insist that mortgage holders retain a term life insurance policy sufficient to pay out their mortgage. Such policies make the bank the beneficiary of the policy. If the mortgage holder should happen to die before the mortgage is paid off, the insurance policy will pay it out. This is also a great benefit to a spouse whose earning power will likely be decreased due to the death of his or her partner.
Business Partner Insurance – Term insurance is also used by business people to cover outstanding loans with their bank, or to purchase a deceased partner’s shares on death, if they had an agreement to do so. Most partnerships have an agreement of this sort, and the policy premiums are paid by the business.
Key Person Insurance – When a company loses key individuals due to death, this can often result in hardship to the company. Key person insurance is purchased by the company for any individual it deems to be “key”. The company itself is made the beneficiary of the policy. So when a “key” person dies, the company receives a cash injection to handle the problems associated with replacing that person.
Getting a Term Life Insurance Quote
Here are some things to look for when getting a quote for term life insurance:
1. The cheapest rate today will not be the cheapest rate tomorrow. For instance, the cheapest premium today will likely be for a Yearly Renewable Term policy. This policy is renewed every year at which time your premium is also adjusted upwards. This is fine if you intend to convert to a longer term solution (permanent insurance) in a year or two, or if you have a very short term requirement for insurance. But if you think you will need this insurance for a longer period, you would be better to commit to something like a Ten Year Term Policy. This locks your premium and death benefit in for ten years. Your rates will not increase until you renew.
2. Compare coverage and premium projections for different policies. Think about the long term and get the coverage that saves you money in the long run.
3. Make sure you completely understand the conversion options built into the different policies you are considering. Most policies will let you convert part or all of your term insurance into permanent insurance within a specific period of time, and without the need of a medical examination.
4. For some situations you should consider options such as Decreasing Term Life Insurance in which the death benefit decreases as time goes by. This makes sense if the policy is being used to cover a mortgage or business loan.
Term life insurance is not the answer to all life insurance requirements, but it should be part of a sound plan for every person’s financial future.
What Factors Determine Term Life Insurance Rates
What Factors Determine Term Life Insurance Rates
Term life insurance policies provide a limited coverage period, which is determined by the policy owner. Term life insurance rates are actually the cheapest form of life insurance, but there are different rates for different people. This is because once the term of the policy is up you don’t receive any payout from the policy. If you take out life insurance at a young age, you will get much better term life insurance rates than if you wait until you are older.
The total cost of your term life insurance rates can be tricky. Some term life insurance policies appear to cost more, but may, in fact, be cheaper when you look at the total cost of the term life insurance policy. For example, annual renewable policies increase your premiums every year and thus may appear to be more expensive than level term policies where the premiums never increase (although the initial premiums for a level term policy will be higher). But, in fact, level premium policies may involve higher costs over the policy’s full term, and become particularly expensive when you try to renew your policy at the end of the term. This is why you do have to compare term life insurance quotes.
Some of the factors that influence your term life insurance rates are:
· Whether or not you smoke. Tobacco users are twice as likely to die as nontobacco users while they are insured. Life insurance companies take this into account when they set their premium and cash benefits levels. You can save from 20% to 30% on premiums by quitting smoking.
· Medical Record. If you have a terminal illness, it is unlikely that any life insurance company will issue a policy. In the case of heart disease, you will get a policy but your rates will be high
· Occupation. if you work in a dangerous occupation, such as working on a ship that carries gas, this will put you into a higher bracket when it comes to getting rates for term insurance. You will have to shop around to compare term life insurance quotes if you are in this category.
Term life insurance rates vary a lot, and you can do something about your premiums by taking some decisions to become more healthy, like giving up smoking.
The 5 Year Term Life Insurance Policy Or Rider
The 5 Year Term Life Insurance Policy Or Rider
5 year term life insurance has been around in insurance circles for a very long time. It can be sold as a policy or as a rider to a permanent life insurance policy. It was never promoted much by life insurance agents perhaps because of it’s extremely low premium which results in a very low commission. Another possibility is that 5 years is a very short period of time for a life insurance policy.
Why 5 Year Term Life Insurance
5 year term life does have it’s place in the portfolios of many life insurance buyers and can fulfill a very important need. If you have a short term need for life insurance then this type of insurance may be for you. If you find it necessary to take out a loan for a short period of time a five year term policy on your life can assure the lender that if you should die before the loan is repaid they will get back their money. Certainly that is a good reason to buy this type of insurance. You may take the loan to pay for a college education either for yourself or a child or grandchild.
The face amount of the 5 year term policy remains level for the duration and so does the premium. Even though it is initially taken out for 5 years some companies allow you to continue beyond the initial 5 year period at a higher premium. The death benefit is more often than not free of income taxes. You may convert your policy to permanent insurance in the future.
Waiver Of Premium Rider
It may be wise to add a waiver of premium rider to your 5 year term life insurance policy. If you should become disabled, anytime after 6 months of disability, the life insurance company will take over the payment of your premiums for you, even if it is for the rest of your life. Think about it for a moment. Do you realize that people become temporarily disabled an average of about 5 times during their lifetimes. If you become disabled for at least 6 months with most companies they will pay your 5 year term life insurance premium for you. Now isn’t that amazing.
Accidental Death Benefit Or Double Indemnity Rider
The famous double indemnity rider can also be attached to your policy. If you should die in an accident the life insurance company will pay to your beneficiary twice the face amount. Let us suppose you bought a 0,000 5 year term policy with one unit of accidental death benefit for each ,000 of your policy and you died in an accident. The life insurance company would pay ,000,000 to your family. That would be just beautiful, wouldn’t it.
Click the link below to learn more about 5 year term life insurance and many other types of life insurance.
Life Insurance – Term Life Or Whole Life?
Life Insurance – Term Life Or Whole Life?
What type of insurance you need depends on many personal factors. What are your insurance needs? What type of budget are you on? And how long do you need your insurance policy for?
Whole Life Insurance
Whole life insurance remains in force for as long you keep paying the premiums or there is sufficient cash surrender value to keep the policy alive.
“Term to 100 years” lasts your lifetime and is cheaper for most people. Again you have to keep paying the premium.Whole life has premiums that do not increase. So does term 100 which you pay for until the age of 100, when you can stop paying and remain insured.
Term Life Insurance
Term life insurance can cover you for any number of years from one to your age 100. As you get older, there may not be as large a need for life insurance because hopefully, your debts are behind you and you have created an estate with your tax paid assets.
Life Insurance – What are you insuring?
Term life insures you against debts such as credit cards and a mortgage debt with your death triggering the ability of your heirs to pay outstanding liabilities.
Whole life is used for building investment capital through the years. It’s a good idea for those who cannot save, as it creates an estate to pay for funerals, compensates for lack of a pension, or pays taxes on large estates.
Life Insurance – Adapting It For Your Needs
Most people get life insurance to protect themselves against debts and to provide for their heirs.
Analyze your needs for coverage and consult an independent life insurance broker to get quotes from different companies. The best time to do this is when you are young and the premiums are low. Remember you are working on establishing, not only your finances for the future, but for the benefit of beneficiaries as well. And those are 2 of the best reasons to buy life insurance.
Term Life Insurance Rates
Term Life Insurance Rates
When you decide to invest in life insurance you need to compare rates for your individual needs from various companies.
Premiums on permanent life insurance policies are guaranteed never to increase beyond the rates outlined in the policy, even though the cost to the insurance company for providing the coverage will not be known for many years. Due to this uncertainty, premiums must be set at a conservative or higher level which ensures the company’s ability to pay the benefits, regardless of the future considerations.
Term Life Insurance Is Different
However for term life insurance, this is not the case as usually the periods of coverage are for a fixed period of years, for example 10 years. If you take such a policy, you would then need to renew it at a higher premium. And you need to remember you may have to undergo a medical exam at that time as the company regards this as a new term life policy.
But the good news is that in Canada, you can buy a “Term 100 year” policy which takes you up to that age at a fixed premium. It’s more expensive than a “Term life 10 year” or a “Term life 20 year” policy but except for older ages, it it still less expensive than whole life insurance.
The Cost Of A Term Life Insurance Or Whole Life Policy Is Determined By Three Basic Factors:
Mortality. The life insurance company initially assumes a certain projected rate of mortality for the lives of those insured. This rate varies with age, product, sex, health and number of years from the issue.
Expenses. The insurance company projects future operating expenses, such as policy acquisition costs, company operating expenses, and other costs of doing business.
Investment Returns. The insurance company initially projects a rate of return on its investments, usually based on current economic conditions.
Smaller term life or whole life insurance policies do not necessarily require the insured to take a medical exam; just supply some medical information.
Some Keys To Getting Low Term Life Insurance Rates
Non smokers pay half the cost of term life insurance than smokers.
Sometimes losing weight can lower your premiums. If you are overweight, find out what weight will lower your premium.
Only about 11% of the public actually qualifies for “preferred” rates – most people pay standard rates.
If a health condition causes you to pay more for insurance – insist on being told the exact reason. Discuss the reply with your doctor to find out if it is accurate.
Remember the only way to find a low life insurance rate, is to find an independent life insurance broker who does the “shopping” to get you the best possible rate for your whole or term life insurance policy.
What Is Level Term Life Insurance?
What Is Level Term Life Insurance?
Level term life insurance, the most common form of term life insurance, is a life insurance policy that gets straight to the point. It’s similar to regular term life insurance in that it provides pure life insurance coverage when you need it with none of the frills of whole life insurance, such as forced savings components.
Level term life insurance has a guaranteed level premium, and you aren’t required to annually renew the policy. The insurance premium stays the same for a set period of time – the length of time for which the policy is in effect (usually 10, 15, 20, or 30 years). The longer the policy is in effect, the higher the annual premium will be.
For example, if you purchase a level term life insurance policy for 10 years, you’ll pay lower premiums than you’d pay if you purchase level term life insurance for 30 years. The reason for this is you’ll get much older during the course of a 30-year policy than you’ll get during the course of a 10-year policy, and life insurance companies view older individuals as more risky to insure. If you purchase a 10-year policy when you’re 30 years old, you’ll only be 40 years old when the policy expires; however, if you purchase a 30-year policy when you’re 30 years old, you’ll be 60 when the policy expires. It costs more to insurance a 60-year-old than it costs to insure a 40-year-old. Make sense?
Level term life insurance policies normally include renewal options. This means you can renew your policy at a maximum guaranteed rate if you choose to extend the term of insurance coverage. This option is usually only implemented if your health has greatly deteriorated during the original term of insurance coverage.
If level term life insurance sounds right for you, begin your search now and make your purchase as early as possible to ensure the lowest premiums possible.