Term Life Insurance Frequently Asked Questions
Why buy Term Life Insurance?
Term insurance provides a low cost way to get maximum insurance protection for a temporary period of time. Term insurance builds no cash value. It pays a benefit only if you die during the term of the policy coverage. If death occurs, the beneficiary collects the face amount (death benefit) of the policy income tax free.
Many insurance companies offer level premium term for a periods of 5, 10, 15, 20 and now even 30 years. Premium rates increase at the end of the guaranteed policy period. These policies have become very popular because of their low cost and the availability of a relatively long term of coverage. Policies require that evidence of insurability be furnished at renewal to qualify for these available rates. It is important to understand the terms of any insurance policy that you are considering before making a purchase.
What are Term Life Insurance Advantages?
Initially, premiums are generally lower than those for permanent insurance, allowing you to buy higher levels of coverage at when the need for protection often is greatest.
It's good for covering specific needs that will disappear in time, such as mortgages or family income needs for children. Term insurance is an effective way to get the most coverage at the low cost for up to 30 years. Top of Page
What are Term Life Insurance Disadvantages?
Once the guarantee period expires, premiums increase as you grow older.
Coverage may terminate at the end of the policy term or may become too expensive to continue.
Generally, the policy doesn't offer cash value or paid-up insurance. Top of Page
When is Term Life Insurance the right choice?
If the low dollar outlay is your main concern, and your insurance need is for a period of 20 years or less, term may have an advantage. If your need for coverage will last beyond 20 years, a low cost Universal Life or Whole Life policy may be more effective. Should your life insurance needs change, many term policies carry a conversion privilege that will allow you to covert your term coverage to permanent Universal Life or a Whole Life policy without a medical examination. It is important to check the conversion privileges of the term policy before you make your purchase. Top of Page
What will effect your your term or permanent life insurance rates?
-
Age - Insurance is primarily age rated. Therefore, if you are very young, your rates will be very low. If you are older, 50 years and up, you can expect to pay more.
- Sex - Males will cost more than females.
- Smoker Status - If you are a smoker or use chewing tobacco, you can expect to pay more. People who are in their 50's and who smoke cigarettes pay significantly more than non smokers. All insurance companies test for nicotine in your blood, so lying about your status will not work. Depending on the insurer, you will be considered a non-smoker if you have not smoked, or chewed, in the last 12 months.
- Medical conditions - All insurers try to limit major risks or claims. Therefore, you can expect that insurers will request your medical records from your doctor. As part of the insurance exam, they will also test for AIDS and do blood and urine analysis. If you suffer from a condition like depression or have high cholesterol, some firms may rate you up , charge more , for the added risk. So when you apply for insurance, realize that you may not get the rate that is offered on the quote.
- Dangerous hobbies - In some cases insurers will either decline to insure you, or charge you more, if you engage in activities that are dangerous. If you fly ultra light planes, parachute, drive racecars or motorcycles, you may be declined or rated. Top of Page