Sam Dede
New member
Term life insurance, also called permanent life insurance, is insurance that offers coverage for a specified term, generally for a specific number of years. It's useful for protecting your family's financial interests in your later years and for making sure that loved ones are financially protected should you will not be around to provide for them. There are many different types of term life policies available, each of which has different benefits and drawbacks. For example, whole life policies are usually far more expensive than term insurance, even though they offer substantially more protection. So how does one choose the right kind of policy?
There are several factors to consider when choosing between permanent and term insurance. The first major factor is the type of income that you and your family will have access to after you die. If you have a large estate, then permanent policies are a good option, as they will typically provide coverage for your dependents after your death, as well as the cost of your funeral. Term policies, by contrast, are less costly in most cases, but will only provide coverage for the period immediately prior to your death; after this period, your beneficiaries will be funded by means of income tax benefits and the remainder of your debt will be paid by your beneficiary trust.
Term life insurance plans can be either variable or fixed. A variable policy gives you the ability to set premium payments based on your current and future earnings, whereas a fixed plan will remain the same throughout your life. The most popular types of fixed-term life policies are Level Term, Annually renewable and Convertible. With a level-term insurance plan, your premiums remain level throughout your coverage period; the benefits and the value of your death benefit are determined by how much of your annual income (as a percentage of your income) you invest in an account maintained by the insurance company.
With annually renewable term insurance plans, your premium payments remain the same for as long as you pay the premiums; however, when the time comes to purchase a death benefit, you must refund the part of the premium in order to gain access to the death benefit. With a convertible term insurance plan, your premium payments are converted into an investment component at the time of signing up. The investment portion of your coverage is designed to provide you with a higher income; the premiums, however, do not return to their original value. In the case of both these types of plans, your premium and investment components remain constant throughout your life.
Before purchasing term insurance you should be aware that it is not required by law to have term insurance coverage. If you have an outstanding mortgage or car loan, you should be looking for a life insurance policy that does not require you to pay off these loans in order to obtain coverage. Term coverage is only purchased if you have an outstanding mortgage or car loan and are unable to refinance or restructure your existing mortgage or auto loan. For this reason, term insurance is not always the best choice. When you do purchase a term insurance policy, your premium payments will never be less than 30% of the total amount of coverage that you receive.
Another thing to keep in mind is that term policies offer renewal discounts at the end of the term. They also have a renewal bonus which gives you a small cash payment (either a discount or flat dollar amount) at the time of the renewal. Many term insurance policies have a one-year renewable term. Some insurers provide these plans as a part of a group policy. Most people will agree that the advantages of term policies far outweigh the disadvantages, but before deciding, you should carefully compare term insurance premiums from various companies.
There are several factors to consider when choosing between permanent and term insurance. The first major factor is the type of income that you and your family will have access to after you die. If you have a large estate, then permanent policies are a good option, as they will typically provide coverage for your dependents after your death, as well as the cost of your funeral. Term policies, by contrast, are less costly in most cases, but will only provide coverage for the period immediately prior to your death; after this period, your beneficiaries will be funded by means of income tax benefits and the remainder of your debt will be paid by your beneficiary trust.
Term life insurance plans can be either variable or fixed. A variable policy gives you the ability to set premium payments based on your current and future earnings, whereas a fixed plan will remain the same throughout your life. The most popular types of fixed-term life policies are Level Term, Annually renewable and Convertible. With a level-term insurance plan, your premiums remain level throughout your coverage period; the benefits and the value of your death benefit are determined by how much of your annual income (as a percentage of your income) you invest in an account maintained by the insurance company.
With annually renewable term insurance plans, your premium payments remain the same for as long as you pay the premiums; however, when the time comes to purchase a death benefit, you must refund the part of the premium in order to gain access to the death benefit. With a convertible term insurance plan, your premium payments are converted into an investment component at the time of signing up. The investment portion of your coverage is designed to provide you with a higher income; the premiums, however, do not return to their original value. In the case of both these types of plans, your premium and investment components remain constant throughout your life.
Before purchasing term insurance you should be aware that it is not required by law to have term insurance coverage. If you have an outstanding mortgage or car loan, you should be looking for a life insurance policy that does not require you to pay off these loans in order to obtain coverage. Term coverage is only purchased if you have an outstanding mortgage or car loan and are unable to refinance or restructure your existing mortgage or auto loan. For this reason, term insurance is not always the best choice. When you do purchase a term insurance policy, your premium payments will never be less than 30% of the total amount of coverage that you receive.
Another thing to keep in mind is that term policies offer renewal discounts at the end of the term. They also have a renewal bonus which gives you a small cash payment (either a discount or flat dollar amount) at the time of the renewal. Many term insurance policies have a one-year renewable term. Some insurers provide these plans as a part of a group policy. Most people will agree that the advantages of term policies far outweigh the disadvantages, but before deciding, you should carefully compare term insurance premiums from various companies.
