Term insurance provides protection for
a specific period of time. It pays a benefit only if you die during
the term. Level term products are the most popular plans purchased today.
The level term can be from 5 years to 30 years. The premium and death
benefit are designed to stay level during the term of the contract.
The premiums can be either guaranteed or not guaranteed. When purchasing
a level term life insurance policy be sure you are aware of the guaranteed
premium period. Once you have been approved and placed the policy in
force with the first payment, the insurance company is obligated to
keep the policy in force as long as you keep paying the premiums. You
are not obligated to pay, but once you stop paying, the policy will
lapse after usually a 30 day grace period. Some term insurance policies
can be renewed when you reach the end of a specific period which can
be from one to 30 years. The premium rates increase at each renewal
date. Most policies require that evidence of insurability be furnished
at renewal for you to qualify for the lowest available rates.
Advantages and Disadvantages of Term Insurance
Initially, premiums are generally lower than those for permanent
insurance, allowing you to buy higher levels of coverage at a younger
age when the need for protection often is greatest.
It's good for covering specific needs that will disappear in time,
such as mortgages or car loans.
The new 20 and 30 and year products can provide coverage as long
as most people might need life insurance.
Premiums increase as you grow older, after the term selected expires,
providing it renews past that term.
Coverage may terminate at the end of the term or may become too
expensive to continue.
Generally, the policy doesn't offer cash value or paid-up insurance.
Questions to Consider When Considering a Term Policy
How long can I keep this policy? If you want the option to renew
the policy for a specific number of years or until a certain age,
what are the terms of renewal of the contract.
When will my premiums increase? Annually? Or after a longer period
of time, such as five or 10, 15, 20, 30 or even 40 years?
Can I convert to a permanent policy? Some policies allow you to
convert the policy to permanent insurance without a medical exam,
regardless of your physical condition at the time of the conversion.
These policies are known as "convertible term."
Here are a few tips to keep in mind when purchasing a life insurance
Take your time. On the other hand, don't
put off an important decision that would protect your family. Make sure
you fully understand any policy you are considering and that you are
comfortable with the company and product.
After you have purchased an insurance
policy, keep in mind that you may have a "free-look" period
usually 10 days after you receive the policy during which you can change
your mind. During that period, read your policy carefully. If you decide
not to keep the policy, the company will cancel the policy and give
you an appropriate refund. Review the copy of your application contained
in your policy. Promptly notify the agent or the company of any errors
or missing information.
Review your policy periodically or when
your situation changes to be sure your coverage is adequate.
Here are some additional items to consider when you are selecting
a term or permanent policy:
What happens if I fail to make the required payments?
If you miss a premium payment, you typically
have a 30- or 31-day grace period during which you can pay the premium
with no interest charged. In a term policy at the end of the grace period
if you do not make a payment the policy will lapse. In a permanent policy,
the company can, with your authorization, draw from a permanent policy's
cash surrender value to keep that policy in force as long as there is
sufficient cash surrender value. In some flexible premium policies,
premiums may be reduced or skipped as long as sufficient cash values
remain in the policy. However, this will result in lower cash values.
What if I become disabled?
Provisions or riders that provide additional
benefits can be added to a policy. One such rider is a waiver of premium
for disability. With this rider, if you become totally disabled for
a specified period of time, you do not have to pay premiums for the
duration of the disability.
Are other riders available?
Another rider, called an "accidental death benefit", provides
for an additional benefit in case of death by accidental means.
"Child Rider" This rider, if available, would require additional premium. Availability and specifics varies by carrier and state.
A relatively new rider offered by some companies provides "accelerated
benefits," also known as "living benefits." This
rider allows you, under certain circumstances, to receive the proceeds
of your life insurance policy before you die. Such circumstances
include terminal or catastrophic illness, the need for long-term
care or confinement to a nursing home. This rider, if available, would require additional premium. Availability and specifics varies by carrier and state. This rider, if available, may require additional premium. Availability and specifics varies by carrier and state.
When will the policy be in effect?
If you decide to purchase the policy,
find out when the insurance becomes effective. This could be different
from the date the company issues the policy.
Tom Maliskey, CSA
1137 Harrison Avenue, Ste 8A | Panama City, FL 32401
Phone (850) 785-8484
Fax (850) 769-7640
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