TERM LIFE INSURANCE
BROKERAGE
As the name implies, term insurance provides protection
for a specific period of time with various rate guarantees.
Term and rate guarantee periods typically range from 10 to
30 years, with 20 years being the most common term.
ADVANTAGES
One of the biggest advantages of term insurance is its
lower initial cost in comparison to permanent insurance.
With term insurance, you're generally just paying for the
death benefit, the lump sum payment your beneficiaries will
receive if you die while the policy is in force. With most
permanent policies, your premiums may accumulate cash value
in addition to paying for lifetime coverage.
Term insurance is often a good choice for people in their
family-formation years, especially if they're on a tight
budget, because it allows them to buy high levels of
coverage when the need for protection is often greatest.
Term insurance is also a good option for covering needs that
will disappear in time. For instance, if paying for college
is a major financial concern but you're pretty sure that you
won't need life insurance coverage after the kids graduate,
then it might make sense to buy a term policy that'll get
you through the college years
WHEN THE LEVEL TERM PERIOD ENDS
But what happens if you buy a term policy only to realize at
the end of the guaranteed level term period that you still
have a need for life insurance? Many policies will give you
the option to re-enter your policy when you reach the end of
the level premium period. You'll probably face a higher cost
since age is one of key factors used to determine life
insurance premiums. To renew the policy, you also may have
to present evidence of insurability (that's insurance jargon
meaning, "take another medical exam and answer a new round
of questions about your lifestyle, health status and family
health history"). If you're still a fine specimen with
healthy living habits, you might re-qualify at a reasonable
rate. But if your health has deteriorated, you may find that
it's too expensive to renew your policy or you may not even
re-qualify. Another option is to continue to pay premiums
that will now increase on an annual basis. Most term
policies will renew to age 90 or 95 as long as you pay the
premiums.
So, when deciding what kind of life insurance policy you
should buy, consider:
- How much coverage will I need now and in the
foreseeable future?
- Which type, term or permanent best fits my needs and
my budget?
- How long do I want to lock in guaranteed premiums?
- What options are available to me in each type of
coverage and what are the costs and benefits of each?
Remember, the best life insurance policy to have is the
one that is in force when it’s needed.
KEY
POLICY PROVISIONS
When considering a life insurance purchase, one thing to
keep in mind is that not all policies are the same. Some may
include certain provisions as standard features, while
others may require you to pay extra to add these features as
"riders" to your policy. So, remember that price is not the
only factor to consider. Ask your agent about provisions
such as:
- Disability waiver of premium - waives premiums when
a policy owner suffers a long-term disability, typically
one lasting six months or longer.
- Accidental death benefits - doubles or triples the
benefit in the case of death by accidental means.
CONVERTIBILITY
Another provision that is very important when considering
term insurance is something called convertibility. Some
insurance contracts only allow "conversion" in the first few
years of the policy, while others allow it at any point
during the term. This valuable feature allows you to convert
your term policy to a permanent policy (e.g., universal life
insurance) without submitting evidence of insurability.
Being able to convert to a permanent policy is a great
option to have in the event that circumstances in your life
change such as failing health or maybe just the realization
that coverage is needed for a longer period of time than you
originally anticipated. That's why, when purchasing a term
policy, it's never a bad idea to find out what kind of
permanent policies are offered by the company you are
considering. Some companies may only have strong term
insurance offerings, while others may have very competitive
products in both categories.
PERMANENT INSURANCE
Permanent insurance provides lifelong protection,
and the ability to accumulate cash value on a
tax-deferred basis. Unlike term insurance, a
permanent insurance policy will remain in force for
as long as you continue to pay your premiums.
Because these policies are designed and priced for
you to keep over a long period of time, this may be
the wrong type of insurance for you if you don't
have a long-term need for life insurance coverage.
Why would someone need coverage for an extended
period of time? Because contrary to what a lot of
people think, the need for life insurance often
persists long after the kids have graduated college
or the mortgage has been paid off. If you died the
day after your youngest child graduated from
college, your spouse would still be faced with daily
living expenses. And what if your spouse outlives
you by 10, 20 or even 30 years, which is certainly
possible today. Would your financial plan, without
life insurance, enable your spouse to maintain the
life style you worked so hard to achieve? And would
you be able to pass on something to your children or
grandchildren?
CASH VALUE – A KEY
FEATURE
Another key characteristic of permanent insurance is
a feature known as cash value or cash-surrender
value. In fact, permanent insurance is often
referred to as cash-value insurance because these
types of policies can build cash value over time, as
well as provide a death benefit to your
beneficiaries.
Cash values, which accumulate on a tax-deferred
basis just like assets in most retirement and
tuition savings plans, can be used in the future for
any purpose you wish. If you like, you can borrow
cash value for a down payment on a home, to help pay
for your children's education or to provide income
for your retirement. When you borrow money from a
permanent insurance policy, you're using the
policy's cash value as collateral and the borrowing
rates tend to be relatively low. And unlike loans
from most financial institutions, the loan is not
dependent on credit checks or other restrictions.
You ultimately must repay any loan with interest or
your beneficiaries will receive a reduced death
benefit and cash-surrender value.
If you need or want to stop paying premiums, you can
use the cash value to continue your current
insurance protection for a specified time or to
provide a lesser amount of death benefit protection
covering you for your lifetime. If you decide to
stop paying premiums and surrender your policy, the
guaranteed policy values are yours. Just know that
if you surrender your policy in the early years,
there may be little or no cash value.
CASH VALUE vs. FACE AMOUNT
With all types of permanent policies, the cash value
of a policy is different from the policy's face
amount. The face amount is the money that will be
paid at death or policy maturity (most permanent
policies typically "mature" at age 120). Cash value
is the amount available if you surrender a policy
before its maturity or your death. Moreover, the
cash value may be affected by your insurance
company's financial results or experience, which can
be influenced by mortality rates, expenses, and
investment earnings.
"Permanent insurance" is really a catchall phrase
for a wide variety of life insurance products that
contain the cash-value feature. Within this class of
life insurance, there are a multitude of different
products. Here we list the most common ones.
WHOLE LIFE
If you are the kind of person who likes predictability
over time, Whole Life insurance might be right for
you. It provides you with the certainty of a
guaranteed amount of death benefit and a guaranteed
rate of return on your cash values. And you'll have
a level premium that is guaranteed to never increase
for life.
Another valuable benefit of a participating Whole
Life policy is the opportunity to earn dividends.
While your policy's guarantees provide you with a
minimum death benefit and cash value, dividends give
you the opportunity to receive an enhanced death
benefit and cash value growth. Dividends are a way
for the company to share part of its favorable
results with policyholders. When you purchase a
participating policy, it is expected that you will
receive dividends after the second policy year - but
they are not guaranteed. Dividends, if left in the
policy, can provide an offset (and more) to the
eroding effects of inflation on your coverage
amount.
UNIVERSAL LIFE
Unlike Whole Life where you pay fixed premiums,
Universal Life offers adjustable premiums that give
you the option to make higher premium payments when
you have extra cash on hand or lower ones when money
is tight.
Universal Life allows you, after your initial
payment, to pay premiums at any time, in any amount,
subject to certain minimums and maximums. You also
can reduce or increase the death benefit more easily
than under a traditional Whole Life policy.
Most Universal Life policies will also provide a
guaranteed rate of return on your cash values, as
long as minimum premiums are paid. It is also
possible that you will not accumulate any cash value
if any, or all, of the following circumstances
occur: administrative expenses increase, mortality
assumptions are changed, the insurance company's
investment portfolio underperforms, premium payments
are insufficient.
In recent years, there’s been considerable interest
in what’s commonly referred to as Universal Life
with Secondary Guarantees (also known as a “No-Lapse
Guarantee”). With an ordinary Universal Life
product, the policy could lapse under certain
circumstances (e.g., interest rates fall below
projections, insurance costs or administrative
expenses rise, etc). When you buy a policy with a
“secondary guarantee,” you’re guaranteed that the
policy won’t lapse even if the above factors come to
pass.
One of the most attractive things about Universal
Life policies with Secondary Guarantees is that they
provide lifelong coverage at rates that can be
considerably lower than other forms of permanent
insurance.
Insurance Brokerage provides you with the latest technology to
search for the best term life insurance quote for your client-
Carrier Profiles
And Links
Facebook
Twitter