Term Life Insurance Options

August 13, 2010 By Leave a Comment

In order to guard your family against financial crisis, you really should strongly consider purchasing life insurance for yourself and your spouse.  There are many different options for life insurance and it can be extremely confusing with all the terms, conditions and choices that you just don’t know much about.  A life insurance broker can help you wade through all these options, but at the end of the day, low cost term life insurance is almost always going to be your best option.

Term life insurance is simple to understand and it is simple, yet effective in operation.  Unlike some of the other expensive options such as whole life insurance or variable annuity life insurance, term life is just life insurance with no investing aspect involved.  Somewhere along the line some company must have decided they could make more money out of clients if they made a convoluted insurance and investing policy and that’s where those choices arose from.

Term life insurance is a policy that you buy for a set period such as 10, 20 or 30 years.  You buy a face value amount of the policy, also known as the death benefit, in increments of (usually) $100,000.  So you could see a $700,000 policy or a $400,000 policy.  Each year you pay an amount to keep the policy in effect and this is known as your premium.  As long as the policy is in effect and you are timely with your payments, you will have this life insurance until the end of the term.  If you die during the term, the insurance company will pay your beneficiaries the face value of the insurance.  It’s really that simple.

If you like the thought of having great life insurance at the lowest possible price then term life is for you.  There are some variations on term life that you might want to consider such as joint term life insurance and return of premium term life insurance.  These are just minor variations on the traditional policy that are reasonable choices to discuss with your insurance broker.

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Understanding Term Life Insurance

February 21, 2010 By Leave a Comment

If you’re just starting your education about life insurance, term life insurance is not only the easiest type of policy to understand, the chances are very good that it’s exactly the type of life insurance you should buy to protect your family financially.

A term policy is simple in that every aspect of it is clearly defined. In return for paying fixed monthly amount, known as the premium, over a defined amount of time, known as the term, you receive a guarantee from the insurance company that should you pass away at any point during the life of the policy, your loved ones, the beneficiaries, will receive a defined amount of money, known as the payout amount or death benefit.

The important thing to understand is that if you outlive the duration of  a standard term policy then nothing will be paid out to your beneficiaries or refunded to you. Normally the length of time for which a term policy is in force is 20 to 30 years. This is a long time, but statistically a great majority of people who purchase term life do outlive their policies, and this enables insurance companies to keep premium amounts quite low. As you research the options that you have  for this kind of policy you might be surprised at the amount of coverage you can afford,  for premium amounts that are quite low, say less than $20/month.

Here’s a final word on the relative merits of term life versus so-called “permanent” life insurance. Insurance agents might try to sell you on the idea of a more expensive variety of permanent life insurance, such as whole life or universal life, by touting its investment benefits over the long term. The problem with permanent life insurance is that the premium amounts tend to be much, much higher than term life insurance, and most insurance experts agree that the price is too high to justify as an investment. You are probably better off getting a good term life insurance policy and investing whatever money you can each month in a sensible long-term investment portfolio.

Either way, do talk to trusted, financially-savvy relatives and friends, as well as a investment professional before you buy life insurance, as it is a very long-term financial commitment.

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When is decreasing term insurance appropriate for you?

November 15, 2009 By Leave a Comment

Decreasing term insurance is not the right choice for everybody because when decreasing term insurance you are decreasing the value of the policy over the term. With basic term life insurance when you decide to decrease the term insurance, the effect isn’t as noticeable because with term insurance the value of the policy remains the same, so when you decrease the value it is just one drop. Decreasing term life insurance means slowly decreasing the value of the policy over a period of time.

The most common place that you will find decreasing term life insurance is in conjunction with a mortgage. Most people have decreasing term mortgage insurance in case something happens to the other person. If you or your partner were to suddenly die, your decreasing term insurance would pay the remainder of your mortgage, which is helpful because you will be reduced to only one income.

Decreasing term life insurance decreases over time, just like your mortgage does, but the biggest problem with this type of term life insurance is that the monthly premiums remain the same. Even as the value of the policy decreases your monthly premium payments are going to be the same, they will never change over the course of your policy. With decreasing term life insurance there are three types of plans that you can choose from.

The first plan choice you have is single life and is good for married couples with only one income. The single life plan pays out when the insured dies, which means if your spouse is the beneficiary it will pay them when you die, but you will not receive a pay out if they die. A joint life first death is good for married couples to use because it pays out to either person upon the other person’s death. This type of policy is usually purchased when buying a home because the policy ends as soon as one person dies and ensures that the mortgage can be paid if something were to happen. The other option that you have is a joint life last survivor and works best for inheritance tax planning. This type of decreasing term insurance does not pay out when the first policyholder dies, it will only pay out after the second policyholder has died.

Decreasing term life insurance has its advantages and disadvantages so before you decide to get a decreasing term life insurance quote you need to make sure it is the right type of life insurance for you. One reason to use this type of life insurance is that it will leave your family with enough cash to pay off the mortgage or other loan in case something happens to the main provider. Another reason that people choose to purchase decreasing term life insurance instead of regular term life insurance is that decreasing term insurance costs less than regular term insurance.

The worst thing about decreasing term insurance is that there is no maturity value on the policy and the policy will only pay out during the term. Unlike other types of life insurance with decreasing term life insurance, there is no investment value in the policy. In addition to there being no investment value, the value of the policy is going to decrease over time and it will keep decreasing until it reaches zero.

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