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At TermLifeInsurance.com, we want you to be as knowledgeable as possible before you choose a competative term life insurance policy. With this in mind, we've designed this page to answer your basic term life insurance questions. Once you've educated yourself, you can use our Needs
Estimator or quick life insurance quote tools to help you pick the best low cost life insurance policy for you.
What is life insurance? Life insurance provides a way to replace the loss of income that
occurs when someone dies. It is a contract between you as the insured person
and the company or “carrier” that is providing the insurance.
If you die while the contract is in force, the insurance company
pays a specified sum of money, usually called a death benefit, free of income tax to the person or persons you name as beneficiaries.
In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.
How much life insurance do I need? The amount of life insurance you buy should replace more than just the loss of income that occurs if youdie. It should also provide money to cover the funeral expenses, inheritance taxes, probate costs, the need for housekeepers and child care, etc. The amount should also be calculated
to provide for your family's future needs as well, including college
education for your children and part or all of your spouse's retirement
needs. For help in estimating these needs, in order to choose the best life insurance policy for you, click on the easy-to-use Needs
Estimator.
What is term life insurance? Term life insurance is the most straightforward type of life insurance
and the easiest to understand. Sometimes it is called “pure” insurance,
since the policy has no financial investment value and most of your
premium goes to pay for coverage, with only a small amount used to pay the term life insurance
company's costs. Term life insurance typically will give you the most bang for your buck.
What is the difference between
term life insurance and other types of life insurance? There are two types of life insurance: temporary and permanent.
Term life insurance is considered temporary life insurance because it
provides coverage for a specific period of time or term. If death
occurs during the term, the policy pays cash benefits to the beneficiary. However,
once the term is over, and if the policy is not renewed, the coverage
ceases. If death occurs after the coverage ceases, no cash benefits
are paid out.
Permanent life insurance can include whole term life insurance, universal
life insurance and variable
life insurance.
This type has a cash value that you can obtain by cashing out the
policy or by borrowing against it. Though it can seem attractive,
most financial experts agree that this feature should be seen as a secondary purpose
of life insurance.
Because term life insurance premiums are generally
lower than permanent insurance premiums, you can usually afford a
higher level of coverage.
What are the different types
of term life insurance available? The different types are as follows:
» Annual renewable term life
insurance is automatically renewable each year up to a specific age limit
(usually 65, but sometimes older). Since the chances of your dying increase statistically the older you get, your premiums go up each year as you renew. If you buy your life insurance policy when you are young and unlikely to die, you can obtain substantial coverage for an inexpensive premium.
» Renewable term life insurance automatically allows you to renew your coverage after the term of the policy is over
(generally 5 to 20 years), even if your health has deteriorated. This is the same way annual renewable
works, but for a longer period of time. Since a lot can happen to your health in 5 or 20 years, renew ability can be a valuable feature. But since it involves a greater financial risk for the carrier, renewable term coverage generally costs more than annual renewable policies. The conditions associated with renewable term may differ from company to company. For example, though you are guaranteed the right to renew at the end of your term, you may or may not be able to renew for the same amount of coverage or for the same term. Your premiums will almost definitely go up upon renewal.
» Level term life insurance guarantees your premium will stay the same each year for the term of your term life insurance policy, generally 5 to 20 years. Term life insurance companies keep your premiums the same by charging you an average of the premiums they would ordinarily charge you with an annual renewable policy. Therefore, you will probably pay more in the early years and less in
the later years than you would if you had an annual renewable policy.
You will probably also encounter a big increase in premiums at the
end of your term when you apply for a new insurance policy. The big advantage
of level term is that your premiums stay the same throughout your policy,
even as you get older. However, if for some reason you change policies
in the early years, when your level term policy is most expensive,
you will end up paying more than you need to for coverage.
» Decreasing term life insurance features a decrease in your cash benefits each year while your
premiums remain level for the duration of the term. Decreasing term is typically used for mortgage payment protection insurance or to cover other items whose costs decrease over time. It isn't a wise choice for your general life insurance needs, which due to the effects
of inflation, tend to increase over time.
» Convertible term life insurance enables you to convert your term insurance into any of the other types of insurance
policies offered by the issuing insurance company. Convertibility can be an advantage if your insurance needs change over time, as they are likely to do. And, since it involves
greater risk for the insurance company, it generally costs more than
annual renewable term.
Do I have to take a medical exam
to qualify for term life insurance? In most cases, an exam is required. If so, the insurer will pay the
costs and have it done at a time and place convenient for you – often
right in your home. Some insurance companies require a medical exam
for all policies, but others require the exams only for policies
with a substantial face value. The examination is basic, covering your height, weight,
medical history, and blood and urine testing. With the blood and
urine tests, the insurer looks for specific medical problems. Positive results
could affect your premium, or even your ability to buy a policy.
What lengths of terms are
offered for term life insurance? Most often, the terms offered are 1, 5, 10, 15 or 20 years. Some
term life insurance companies offer longer terms of 25 and 30 years.
What term is right for me? It depends on how old your children are, how many years before you retire, and other factors. Many like the security of being insured up until their retirement, usually at age 65. Others prefer to remain covered only until their youngest child graduates or leaves school, and so they
make sure their term life insurance coverage includes money to pay for all
college tuition or other educational expenses.
Most experts agree that you should carry insurance at least until your youngest child is
18. So if your youngest child is 3-years-old now, you would want to carry your insurance for at least 15 years. But that doesn't mean you have to lock into a 15-year term. You could instead buy
an annual renewable policy and renew it for 14 years in a row. You
should compare the total 15-year cost of the annual renewable policy and the 15-year
term policy, making adjustments for the time and value of money,
to determine what the best value is for you.
What happens when the term is over? It all depends on the type of term life insurance you have.
With renewable term, you are guaranteed the right to take out another term policy without
the formality of a new application or medical examination. With standard
term, your insurance coverage ceases, and you have to apply again,
including taking a medical examination. With convertible
term, you reserve the right to convert your term policy to another type of policy, such as whole life or universal life — or
in some cases, another term policy—at any time during the term
of your policy. You should, however, expect an increase in your premiums
with your new policy.
What is the difference between
guaranteed
and non-guaranteed premiums? If a term life insurance policy offers level term, it is usually one of two types. The first type is guaranteed premium level term, which the premiums are guaranteed to remain level during the entire term of the policy.
The second type is non-guaranteed premium level term policy, which
the premiums are only guaranteed for a portion of the term period. Most of the
time, the partial guarantee runs 5 or 10 years. In this kind of policy
the insurance company reserves the right to raise premiums under certain
conditions.
How will my premium be determined? Age, height, weight, past and present medical conditions, family
medical condition history and lifestyle can all affect the determination
of your premium. The choices you make regarding coverage, such as length
of term and guaranteed premiums, will also affect the amount you will pay.
What
does the term life insurance
application process involve? Once you’ve compared the term life insurance online quotes
and reviewed the terms of coverage, select the most competitive term life insurance policy
that best suits your needs by clicking on the “Buy” button.
You will then be asked to fill out a brief online application, which
includes your contact information. Your information will be kept
private (see our privacy policy).
After your application is received, a licensed agent from TermLifeInsurance.com
and Kelsey National Corporation will contact you. If a medical exam is required by the term life insurance company you have chosen, the agent will
set up a convenient appointment for the no-charge exam. The medical exam can take place in your home or office, and is performed by a medical professional.
Upon completion of the application and medical exam (if required),
the agent will submit the information to the term life insurance
company. Four to eight weeks are required for most companies to underwrite
and issue the policy.
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