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.