TermLife.org: Term Life Insurance

How Does Term Life Insurance Work?

Posted on January 26, 2012 by SharonNoel

For some of us, the thought escapes us in the day-to-day life. We forget just how fragile and unstable life can be. In a moment, it can all be over. Have you ever thought about what would happen to your family or your belongings if you died? If not, this could be a good time to start.

Why is Term Life Insurance Important?

Death can happen to anyone at any time. Car accidents, health conditions and accidents at work or at home can happen to anyone of any age. No one is guaranteed a set number of days of life. And whether this idea bothers you much or not, what should bother you is all of the debt that you will leave behind. This debt will have to be paid, even if you die.

Your car payment, your student loan payments, your mortgage, your credit card debt – all of it will now be someone else’s responsibility. That someone will be someone that you love. If you are married, have children, siblings, parents or any other relatives, they will be the ones left responsible for your debt. Your loved ones must also find a way to fund your funeral costs, which can be unbearable, even without the added debt. Life insurance is intended to pay for these expenses so that your loved ones don’t have to.

What is Term Life Insurance?

Term life insurance is a life insurance policy that covers you, in the event of your death, for a predetermined amount of time. You pay a monthly premium for this coverage and your benefits are paid to a beneficiary. Your beneficiary can be anyone of your choosing, but the most common beneficiaries include spouses and children. Once the life insurance policy term is up, you no longer have coverage unless you choose to renew or convert your policy.

Paying Your Premium

In exchange for coverage, you pay a monthly premium for your term life insurance policy. This works much like car insurance or home insurance. The coverage costs you a set amount of money. Several factors and variables are used to determine the amount of your monthly premium and if you fail to pay your premiums, your policy will term or cancel.

Pure Insurance Protection

Term life insurance policies are considered to be “pure insurance protection” policies. Essentially, this means that the policy does not build any type of cash value. Should you choose to terminate the policy any funds that you have placed into your term life insurance policy will be lost. Funds are only released on the policy in the event of your death.

Medical Exams

Medical examinations are generally required to obtain term life insurance policies. Exams are used, in part, to determine the amount of your premiums. During medical examinations, general health and lifestyle habits will be evaluated. Certain medical conditions that can shorten your lifespan, put you at a higher risk for death or lifestyle habits that can cause certain medical conditions, like smoking, can increase the cost of your monthly premium dramatically.

Determining the Term of Your Policy

Term life insurance policies can be set to term anywhere from one year to thirty-five years, depending on your preference. Upon applying for your insurance policy, you can decide the term for coverage. Many policy holders are unsure as to how long of a term they should choose. Some factors to consider when purchasing term life insurance is the age and number of children you have, the amount of income you currently make, the amount of debt you currently have, the length of time you may have any debt obligations like a mortgage or car payment and the duration of any educational expenses for your child or your spouse.

Because premiums are likely to increase each year with age, you will want to try and choose coverage that will keep you insured until all major expenses have been paid. This can be until your children are adults, until your mortgage is set to be paid or until all educational needs will be met. Should you find that you don’t need coverage as long as you had predicted, your policy can be terminated early, but you cannot reduce the amount of new coverage, should you shortchange yourself.

Converting Your Policy

Some life insurance companies will allow you to convert your policy around the term date. You can change to universal or whole life insurance, which will cover you from the start date of the policy until your death. These types of policies are generally more expensive, but they ensure that you have coverage for the entire duration of your life. Budget-wise, they may not be feasible for families, but they may appeal to you later in life when you will have more money to invest in your insurance.

What Is Renewable Term Life Insurance?

Posted on January 19, 2012 by MinaQueen

Life insurance is a necessity in today’s world; especially if you have a family. The problem for many people is the cost. Even if you are healthy and young, the costs may be too much to handle in today’s strapped economy. But, add any type of medical issue, and life insurance costs may be so high you can not even consider it. Luckily, there are some ways to cut costs and get the coverage you need.

There are a lot of different ways to save on life insurance costs these days. One good option is to consider taking out a renewable term life insurance policy.

The Annual Renewable Plan

One of the best ways to get a term life insurance policy as cheaply as possible is to take out an annual renewable plan. This is a plan that is offered one year at a time. The benefits to this type of insurance policy is that the rates generally start out exceptionally low – especially if you are very young when you initiate the coverage, and are reviewed each year to determine whether you are a higher risk and need to pay a higher premium s you grow older..

The dangers of this type of insurance plan is that you may be asked to resubmit medical information each year and even undergo an intensive medical review, complete with a physical and blood work to determine your eligibility. If you have any changes in your health at all, the rates can quickly skyrocket. Stay healthy though, and you will likely only see a minimal increase.

While a good option for young and healthy consumers, an annual renewable term is usually not the ideal situation for older customers who may face big premium increases as they age and their health becomes more of a concern.

Longer Renewable Plans

Not every renewable term life insurance plan comes up for renewal every year. There are 5 years, 10 year and even 20 year renewable policies being offered within the industry. These too, come with their own sets of pros and cons.

Again, the major downfall of any type for renewable plan is that you must reapply when the term is up. For some people, this may mean either being denied coverage altogether or being charged a lot more for the same coverage they have already had for years. Depending on your personal health status, your premiums can go up a little or go up a lot. The underwriters may decide to drastically change your policy coverage and overall plan.

Of course, the longer the term, the longer you have before you must reapply. For some people, this is all the time they need to ensure that they can get their children grown and out of the house; pay off their debt; etc., and make other financial plans for their survivors. Others, however, may find it difficult to obtain new coverage when their current policy expires.

Guaranteed Renewable Plans

One way to combat this problem is to spend a few dollars more in monthly premiums and take out a guaranteed renewable term life insurance plan form the beginning. While you may still be forced to pay a much higher premium for the new policy when your current one expires, a guaranteed renewable plan does offer the guarantee that a new policy will be issued by the company if you decide you want one. This can be a very safe option for most consumers; but especially those who anticipate health problems in the future.

Renewable term life insurance plans come in all shapes and sizes. From the annual term to a 20-year term to the guaranteed renewable option, today’s consumer can design just about nay kind of policy they like to best meet their needs and their budget restraints.

Of course, be sure to talk over your options carefully with your insurance agent to make sure that you are indeed getting the right type of coverage at a price that you can afford.

Posted in Basics | Tagged cut insurance costs, life insurance options, renewable life insurance | Leave a comment

Group Term Life Insurance Definitions and Terms

Posted on January 12, 2012 by SharonNoel

If your employer offers life insurance, you may have considered purchasing a policy. Or maybe you belong to another group that offers life insurance and you wonder if the benefits are worth signing up. You know it will help protect your family, should you pass away. But if you are like most people, you are unsure about the terms used to describe the life insurance policy that your group or employer offers. To help you better understand your group term life insurance policy and what it covers, a list of the most commonly used terms and their definitions can be found below.

What is Group Term Life Insurance?

Probably the most important term to understand is group term life insurance. Without a basic understanding of what it is you are being offered, you may opt out of purchasing this valuable asset. Term life insurance is a life insurance policy that has a set time period for coverage (e.g. 15 years). Group term life insurance is a policy that is offered only to groups, such as employers, at a discounted rate. This is the major benefit of obtaining a life insurance policy through your employer.

Veterans Group Life Insurance

Veteran group life insurance is offered to veterans until after one year and 120 days after their discharge from service. This enables the veteran to carry their life insurance policy from their Service members Group Life Insurance Policy to an individual life insurance policy, while still reserving the military insurance benefits. This type of insurance is a renewable term insurance policy. There is also a big advantage to choosing a veterans group life insurance policy. Unlike other insurance policies that figure in risks like smoking, drinking, age and overall health, veterans group life insurance does not use these factors to calculate your premium. If you have any of these issues in your past or present and still have the ability to take advantage of this opportunity, it would be a very wise decision to do so while you still have a chance.

Yearly Renewable Group Term Life Insurance

Yearly renewable group term life insurance is different than group term life insurance. With this type of life insurance, the policy must be renewed each year. This type of insurance reduced that amount of premiums that are paid by the employer, but it can increase the amount you must pay each year. The most common reason that employers choose this type of coverage is high turnover in the workplace. Once you no longer work with your employer, you no longer have access to their group term life insurance.

Note: Some life insurance companies will allow you to continue your coverage if you agree to pay the full amount for the policy. This amount is usually higher than the amount that you and your employer paid for the policy, but it does prevent a lapse in coverage.

Level Term Policy

A level term policy, unlike a yearly renewable policy, provides protection for a period longer than one year. Level term policies are most commonly offered for 5, 10, 15, 20, 25, 30 or 35 years. If you notice, this type of policy generally works in five year intervals. Some policies will allow you to convert your policy or renew it after the term is up, but there are no guarantees of renewal unless a guaranteed renewal is expressed within your policy.

Accidental Death

Unlike a full term life insurance policy, accidental death policies cover the insured only in the event that death is ruled as an accident. Payout for this type of insurance is very difficult to obtain because there are many exclusions and many families, amongst the pain and agony of dealing with the accident itself, forget to maintain the policy until death actually occurs.

Policy Not Taken (NTO)

This is the term used in your policy documents, should you decide not to accept the insurance offered through your group or your employer.

Death Benefit

The death benefit of your policy is the amount of money (otherwise referred to as face amount) that will be paid to your beneficiary in the event of your death. The beneficiary is named by you and can be anyone that you choose, but the beneficiary will have to provide legal documentation to prove that you have, in fact, died. In most cases, this is done through a death certificate. To change the beneficiary after the policy is initiated, you will have to contact the life insurance company.

Premium

Your life insurance premium is the amount of money that you must pay to maintain the policy. In a group policy, the insured is usually responsible for at least part, if not all of the policy premiums. If responsible for the full premium, you are receiving only the benefit of having a discount on your premiums by signing up under your employer or group.

Posted in Term Life Insurance | Tagged Accidental Death, Group term life insurance, term life insurance | Leave a comment