For all forms of life insurance, you pay each year. The only difference between term insurance and all the other life insurance is whether you pay the life insurance premiums directly (as with term life insurance) or the payment comes out of the earnings from an investment that the insurance company holds (as with other types of life insurance). Here you will read the attributes of term life insurance that distinguish it from the other forms. The various provisions that differentiate each attribute and each type of term life insurance.
Understanding Term Insurance
At its simplest level, term insurance provides life insurance for a defined period (usually a one-, five-, or ten-year term). For that insurance, you pay a monthly, quarterly, annual, or semi annual premium that remains constant during the specified term. But that’s pretty much the only constant. Can’t even say that the death benefit remains the same for the entire term of the policy because various options are available, such as decreasing term insurance and increasing term insurance, in which the death benefit changes each year.
These two products are distinguished from level term insurance, in which the death benefit remains the same for a specified period. Term insurance provides a benefit for others if you die during the specified period. Term insurance is not an investment — you receive no benefits other than the security of knowing that if you die, the insurance proceeds go to your beneficiaries.
Exploring Options in Term Insurance
Although term insurance is no more than a policy for a defined period, it comes in many different forms, and you have various options when choosing a policy.
Renewable term
The primary purpose of life insurance is so that your beneficiaries receive a benefit if you die. If you buy life insurance, not only do you want your policy to remain in effect during the specific period you designated, but you also want to be able to keep buying the insurance until you decide to stop — not when the company decides that you’ve become too great a risk.
Most term life policies are renewable — but your premium
may not be the same for the renewed period. After each term ends (Based on number of years) the amount you pay per year for the next term will increase.A policy may be renewable only for a limited time (ten years, for example). So when shopping for a policy, be sure to check for how long it is renewable.
Age limits
Many term insurance policies have an age limit (specified in your contract) after which the company won’t allow you to renew your policy. This age can range from as low as 60 years old to 85, 90, or even older. Obviously, at the upper age ranges most people are extremely high risks, so the price of coverage would be so high that it wouldn’t pay for you to purchase coverage. When looking at term insurance policies, make sure you give consideration to any age limits imposed in the policy.
Convertible term
If you purchase a convertible policy, you are allowed to convert to a different type of policy — one that builds a cash value, such as whole life or universal life, without having to pass another medical exam. Again, because your health is more likely to deteriorate as you age, this feature may be important if you think that you may want to keep buying life insurance later in life.
Consider the following questions regarding convertibility:
To what can you convert your policy? Whole life? Universal life? Either one? Any product the company offers later on? When can you convert? Some policies specify how many years you have to convert. Obviously, more time to decide gives you more options when you need them. Of course, the additional flexibility likely means a higher premium throughout the life of the term policy.When you do decide to convert, will the new premium be based on your age when you convert?
Decreasing term
For most term insurance policies, the death benefit remains constant and the premium increases over time. With a decreasing term life policy, the opposite is true: After the specified term, the face value of the policy decreases, while the amount you pay each year or month remains the same. In that way, the insurance company effectively increases its premium, which it must do because, as you age, you’re at a greater risk for death. So the same premium purchases an increasingly lower amount of insurance.
Mortgage insurance is an example of decreasing term insurance. When you buy mortgage insurance, you’re making sure that your home mortgage gets paid off if you die. But of course, while you’re alive, you’re paying off your mortgage principal, so the balance keeps declining.
Re-entry term
Renewable term insurance may have a provision called reentry, which means that the insurance company can ask you to undergo a medical exam before it will renew your policy after the term expires. If your health isn’t good and the reentry clause permits it, the company can cancel your insurance.
The gamble here is that you will remain healthy. Then again, if the re-entry clause doesn’t permit the company to cancel your insurance but does allow it to charge you higher premiums, you’re gambling on money, not your health.
When purchasing re-entry term insurance, make sure that you keep the right to renew your insurance even if you don’t pass a medical exam. Although may have to pay higher premiums, at least the company won’t be able to cancel your policy.
******Usman ahmed owner of this blog created this post with his knowledge.All content provided on this blog is not copied from any other blog and site and is for informational purposes only and The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.
Understanding Term Insurance
At its simplest level, term insurance provides life insurance for a defined period (usually a one-, five-, or ten-year term). For that insurance, you pay a monthly, quarterly, annual, or semi annual premium that remains constant during the specified term. But that’s pretty much the only constant. Can’t even say that the death benefit remains the same for the entire term of the policy because various options are available, such as decreasing term insurance and increasing term insurance, in which the death benefit changes each year.
These two products are distinguished from level term insurance, in which the death benefit remains the same for a specified period. Term insurance provides a benefit for others if you die during the specified period. Term insurance is not an investment — you receive no benefits other than the security of knowing that if you die, the insurance proceeds go to your beneficiaries.
Exploring Options in Term Insurance
Although term insurance is no more than a policy for a defined period, it comes in many different forms, and you have various options when choosing a policy.
Renewable term
The primary purpose of life insurance is so that your beneficiaries receive a benefit if you die. If you buy life insurance, not only do you want your policy to remain in effect during the specific period you designated, but you also want to be able to keep buying the insurance until you decide to stop — not when the company decides that you’ve become too great a risk.
Most term life policies are renewable — but your premium
may not be the same for the renewed period. After each term ends (Based on number of years) the amount you pay per year for the next term will increase.A policy may be renewable only for a limited time (ten years, for example). So when shopping for a policy, be sure to check for how long it is renewable.
Age limits
Many term insurance policies have an age limit (specified in your contract) after which the company won’t allow you to renew your policy. This age can range from as low as 60 years old to 85, 90, or even older. Obviously, at the upper age ranges most people are extremely high risks, so the price of coverage would be so high that it wouldn’t pay for you to purchase coverage. When looking at term insurance policies, make sure you give consideration to any age limits imposed in the policy.
Convertible term
If you purchase a convertible policy, you are allowed to convert to a different type of policy — one that builds a cash value, such as whole life or universal life, without having to pass another medical exam. Again, because your health is more likely to deteriorate as you age, this feature may be important if you think that you may want to keep buying life insurance later in life.
Consider the following questions regarding convertibility:
To what can you convert your policy? Whole life? Universal life? Either one? Any product the company offers later on? When can you convert? Some policies specify how many years you have to convert. Obviously, more time to decide gives you more options when you need them. Of course, the additional flexibility likely means a higher premium throughout the life of the term policy.When you do decide to convert, will the new premium be based on your age when you convert?
Decreasing term
For most term insurance policies, the death benefit remains constant and the premium increases over time. With a decreasing term life policy, the opposite is true: After the specified term, the face value of the policy decreases, while the amount you pay each year or month remains the same. In that way, the insurance company effectively increases its premium, which it must do because, as you age, you’re at a greater risk for death. So the same premium purchases an increasingly lower amount of insurance.
Mortgage insurance is an example of decreasing term insurance. When you buy mortgage insurance, you’re making sure that your home mortgage gets paid off if you die. But of course, while you’re alive, you’re paying off your mortgage principal, so the balance keeps declining.
Re-entry term
Renewable term insurance may have a provision called reentry, which means that the insurance company can ask you to undergo a medical exam before it will renew your policy after the term expires. If your health isn’t good and the reentry clause permits it, the company can cancel your insurance.
The gamble here is that you will remain healthy. Then again, if the re-entry clause doesn’t permit the company to cancel your insurance but does allow it to charge you higher premiums, you’re gambling on money, not your health.
When purchasing re-entry term insurance, make sure that you keep the right to renew your insurance even if you don’t pass a medical exam. Although may have to pay higher premiums, at least the company won’t be able to cancel your policy.
For The User
******Usman ahmed owner of this blog created this post with his knowledge.All content provided on this blog is not copied from any other blog and site and is for informational purposes only and The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.
No comments:
Post a Comment