Term Insurance: Still a family option

Until you try to purchase your first home, or make some other major purchase, you probably won't even think about life insurance. Most parents—if they have any sort of income—purchase life insurance on their children, either in the form of riders or very inexpensive juvenile insurance. If something happens to you while you are young, they will have enough to at least put you in the ground.
continued below >>

request a free quote >>

Types of Term Insurance

Level: This is the most common and is what most people have. You pay a level premium (meaning it doesn't change) and have a level face value for the pre-determined number of years.

Annually Renewable: This type of term will keep a level face value, but the premium will go up every year. Usually this is one of the conversion options when a level policy reaches maturity.

Decreasing: This is the old mortgage life insurance and is also one of the conversion options for a level term. Decreasing term is the one you probably don't want. Although it is even cheaper than level term, each year the face value drops. You pay the same premium until the face value drops to nothing, at which time the policy expires.

Fine print issues to watch out for:

• Make sure you know how long the Term will last before it goes into annually renewable or some other option.
  
  
• Make sure it isn't an "accident only" policy. Don't be like the client who paid her local credit union for 20 plus years, but when her husband died, she could not get a dime. Many bank and credit union "freebees" are accident only.
  
  
• Ask if it will be effective immediately. A graded benefit life policy is a policy for people who have severe health issues. No one can be denied. Consequently, it will not pay the face value for the first two or sometimes even three years.
  
  
• What will happen if you do die within the first two years? All companies have a right to "contestability" during the first two years of any policy. They will pay, but before doing so, they have the right to ask for medical reports and to investigate to find out if you had any pre-existing problem that would have usually resulted in a denial. Find out what kind of process the company undergoes in such circumstances and how long it usually takes.
  
  
• Will you have the option of converting to whole life? Even if you want a Term policy, don't buy from a company that sells only Terms and has no whole life or universal option available for conversion.
  
  
• If you choose to renew your policy, will you be able to do so as long as you live? Some Term policies simply expire at age 75 or 80, leaving the senior with nothing for even minimal final expenses. Don't put your family in that situation.

>> continued from above >>
If you acquire a job with a major company, one of the "benefits" will probably be life insurance. When you leave the job, the insurance is also gone, but it's nice to have it at the time. So, life insurance of your own is the last thing to cross your mind.

Nevertheless, it's something you need. Term is a cheap—and in most cases the cheapest option, but you need to understand that "not all Terms are created equal." The following basic information will help keep you from making a mistake that could cost you hundreds of dollars and leave you with little or no insurance.
(back to top)