Term Life Insurance
Term life insurance is the most basic type of financial protection for your survivors when you die. Whether it is your family depending on your efforts to earn money and provide for your family, or to protect your business and those who make a living from it, it is very important to have enough protection in place to make sure their world isn’t destroyed completely as a result of your death. Term life is attractive to many due to the fact that the premium check you write is much smaller, for most people, than for a permanent plan of insurance like whole life or universal life. Note: just because the premium check is for a smaller amount, does not mean the coverage is “cheaper”. That discussion will be found under Permanent Insurance in our Products and Services tab.
The most important consideration when buying Term Insurance is buying enough death benefit. We find most people to have cut themselves short in providing enough death benefit. One thing that is greatly misunderstood is the fact that there must be an “economic justification” for the insurance. No responsible insurance company will sell you too much insurance. You buy insurance with good health, a good reputation and a demonstrated need. You fund it with money to pay premium, but you must first qualify. So, when deciding to purchase coverage, ask yourself this question; “If I die tonight, what do I want to happen to ___________(family, business, etc.) tomorrow?” Then we can figure out how much to buy. If you are still not sure, contact us, as we have a great process for figuring this out, we are here to help.
The second consideration is “What company should I buy the coverage from?” If you are like many people, you just look for the cheapest price. That might be ok if I am buying a specific product, like a particular model of dishwasher or golf ball, then finding the cheapest price for the product you have specifically identified is just fine. With term insurance, not all contracts are the same and not all companies are equal. That is one of the reasons we have more than 40 carriers available to our clients. Of course we want the lowest price possible, but we know that certain factors will help us to know what the best priced coverage is for you and your particular situation.
Term insurance can be a very important part of a comprehensive financial plan. You can call an online service, or you can work with a firm that looks at the big picture. This is too important of a decision to leave to chance, or a stranger over the phone. Work with an experienced professional, you will be glad you did!
Here are 5 questions you should have answers to before purchasing Term Life Insurance:
1. What is the financial strength and claims paying ability of the company?
2. Are there any health or reputation issues to be considered?
Things like taking medications, smoking, family history, reckless driving, etc. Some companies will take people with high blood pressure or mild diabetes or even cigar smokers and approve them for standard, nonsmoker rates or better. Knowing which company to use can make a huge difference in the offer you will receive.
3. Is there a conversion privilege?
If there is, are there any restrictions as to how long the period is or what products can I convert into? Many companies with ultra low rates have very restrictive options in this area. Even though many people just expect to buy another term policy once theirs expires after the original level premium period, for a lot of us that won’t be possible. This usually happens if one’s health has changed. We have really helped a number of folks out over the years, who had their health change due to cancer or heart disease, yet they were able to convert their term policy and retain their preferred or better rating, even though they were currently uninsurable! The conversion privilege can be a real powerful benefit, make sure you fully understand how it works and how you can exploit it!
4. How many years do I want the coverage for?
Today, you can purchase 10, 15, 20 and even 30 year term coverage. That means that your premium stays level for a period of years. After the guarantee period, you premiums will usually go up by 10 times or more! That is because the insurance company want to underwrite you again, to make sure you are still healthy. That is one of the reasons why the conversion privilege can be so important! As a side note, if you want the coverage to last more than 10-15 years, you should also look at a number of permanent options, you might be surprised at how much better that work out for you.
5. Does the policy include a “return of premium” feature?
These policies usually charge a higher premium and then refund all of your premiums at the end of the level premium term (10-20-30 years, etc.), if you haven’t died. While this sounds good, you must pay that higher premium for all of the years and not leave early, or you will lose the refund. It usually isn’t worth the money. There are other ways to make sure you get your premium back, but have much more flexibility in terms of when you can get your money back. We can discuss this approach if you like, just contact us.