Term Life Insurance
Sunday, January 13, 2008
Types of Term Insurance
1) Annual renewable term
The simplest form of term life insurance is for a term of one year. The death benefit would be paid by the insurance company if the insured died during the one year term, while no benefit is paid if the insured dies one day after the last day of the one year term. The premium paid is then based on the expected probability of the insured dying in that one year.
Because the likelihood of dying in the next year is low for anyone that the insurer would accept for the coverage, purchase of only one year of coverage is rare.
One of the main challenges to renewal experienced with some of these policies is requiring proof of insurability. For instance the insured could acquire a terminal illness within the term, but not actually die until after the term expires. Because of the terminal illness, the purchaser would likely be uninsurable after the expiration of the initial term, and would be unable to renew the policy or purchase a new one.
This issue is frequently overcome by a feature in some policies called guaranteed reinsurability included on some programs, that allows the insured to renew without proof of insurability.
A version of term insurance which is commonly purchased is annual renewable term (ART). In this form, the premium is paid for one year of coverage, but the policy is guaranteed to be able to be continued each year for a given period of years. This period varies from 10 to 30 years, or occasionally until age 95. As the insured ages, the premiums increase with each renewal period, eventually becoming financially unviable as the rates for a policy would eventually exceed the cost of a permanent policy. In this form the premium is slightly higher than for a single year's coverage, but the chances of the benefit being paid are much higher.
2) Level Term Life Insurance
Much more common than annual renewable term insurance is guaranteed level premium term life insurance, where the premium is guaranteed to be the same for a given period of years. The most common terms are 10, 15, 20, and 30 years.
In this form, the premium paid each year is the same, and is based on the summed cost of each year's annual renewable term rates, with a time value of money adjustment made by the insurer. Thus, the longer the term the premium is level for, the higher the premium, because the older, more expensive to insure years are averaged into the premium.
Most level term programs include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. Typically this clause is invoked only if the health of the insured deteriorates significantly during the term.
A level term policy may be suitable for people who know they need coverage for a certain number of years - such as a small business owner who has a short or medium-term risk to cover. Or for people who are unsure of their long-term goals and want something affordable today, with the opportunity to review tomorrow.
The simplest form of term life insurance is for a term of one year. The death benefit would be paid by the insurance company if the insured died during the one year term, while no benefit is paid if the insured dies one day after the last day of the one year term. The premium paid is then based on the expected probability of the insured dying in that one year.
Because the likelihood of dying in the next year is low for anyone that the insurer would accept for the coverage, purchase of only one year of coverage is rare.
One of the main challenges to renewal experienced with some of these policies is requiring proof of insurability. For instance the insured could acquire a terminal illness within the term, but not actually die until after the term expires. Because of the terminal illness, the purchaser would likely be uninsurable after the expiration of the initial term, and would be unable to renew the policy or purchase a new one.
This issue is frequently overcome by a feature in some policies called guaranteed reinsurability included on some programs, that allows the insured to renew without proof of insurability.
A version of term insurance which is commonly purchased is annual renewable term (ART). In this form, the premium is paid for one year of coverage, but the policy is guaranteed to be able to be continued each year for a given period of years. This period varies from 10 to 30 years, or occasionally until age 95. As the insured ages, the premiums increase with each renewal period, eventually becoming financially unviable as the rates for a policy would eventually exceed the cost of a permanent policy. In this form the premium is slightly higher than for a single year's coverage, but the chances of the benefit being paid are much higher.
2) Level Term Life Insurance
Much more common than annual renewable term insurance is guaranteed level premium term life insurance, where the premium is guaranteed to be the same for a given period of years. The most common terms are 10, 15, 20, and 30 years.
In this form, the premium paid each year is the same, and is based on the summed cost of each year's annual renewable term rates, with a time value of money adjustment made by the insurer. Thus, the longer the term the premium is level for, the higher the premium, because the older, more expensive to insure years are averaged into the premium.
Most level term programs include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. Typically this clause is invoked only if the health of the insured deteriorates significantly during the term.
A level term policy may be suitable for people who know they need coverage for a certain number of years - such as a small business owner who has a short or medium-term risk to cover. Or for people who are unsure of their long-term goals and want something affordable today, with the opportunity to review tomorrow.
Labels: Types of Term Insurance
Advantages/Disadvantages of Term Insurance
Advantages
- Initially, premiums are 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, car loans and other obligations.
- 20 and 30 year products can provide coverage as long as most people might need life insurance.
Disadvantages
- Premiums for succeeding terms of coverage increase as you grow older, after the term selected expires.
- 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.
- Initially, premiums are 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, car loans and other obligations.
- 20 and 30 year products can provide coverage as long as most people might need life insurance.
Disadvantages
- Premiums for succeeding terms of coverage increase as you grow older, after the term selected expires.
- 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.
Saturday, January 12, 2008
Life Insurance Facts
What is Life Insurance?
Life insurance is protection against financial loss resulting from death. It is an insurance company's promise to pay your beneficiary a specific amount of money when you die in exchange for timely payment of premiums.
Life insurance is a cornerstone of sound financial planning. You can make use of life insurance to grow and safeguard your money for the benefit of your financial well-being.
There is a wide range of life insurance products to choose from to suit your individual needs and means.
Why do you need life insurance?
Life insurance provides you and your family valuable financial protection against financial loss in the event you die unexpectedly or suffer from a critical illness or physical disability.
With adequate coverage, life insurance can provide you with an income during your retirement years, act as a financial back-up for emergencies or protect you against huge medical costs that you may incur.
* For protection
Life insurance can provide protection against life’s unforeseen events such as physical disability, critical illness or untimely death. When such unfortunate events occur, an insurance company will pay out benefits to the beneficiaries in accordance with your insurance policy.
The benefits are intended to cover financial needs of family members – most often parents, spouse and children – who are dependent on you for these needs.
With insurance coverage, you can be assured that your family’s financial needs are taken care of.
* For retirement
Statistics have shown that we are living longer. We run the risk of outliving our savings if we do not save adequately. Thus, it is prudent to consider ways to ensure that we have a comfortable income during our golden years so as to enjoy the lifestyle we have been accustomed to.
Life insurance can play a significant role in long-term retirement planning and providing an income during your retirement years. However, do not wait till you are close to retirement or have retired to consider the options. Planning should be done early, when you are much younger, so that the returns will be more beneficial in your senior years.
* For savings
Life insurance can be a vehicle that instills the discipline of saving regularly and still provides that much needed insurance coverage.
In addition, should the unfortunate premature death or disability happen to you during the protection period stipulated in your insurance policy, the sum insured will still be paid to you or your beneficiaries.
* For investment
There are life insurance products that offer the combination of savings and insurance protection, and at the same time, enables you to have more flexibility and choice as to how your premiums are invested.
This is typically suited for those who may like a higher potential for investment return. However, higher returns typically mean higher risks. In deciding which funds to invest in, you should consider your own risk appetite and investment horizon.
With the appropriate life insurance product, you can reap higher returns and still be assured that your loved ones are protected from financial loss when you are not around.
Life insurance is protection against financial loss resulting from death. It is an insurance company's promise to pay your beneficiary a specific amount of money when you die in exchange for timely payment of premiums.
Life insurance is a cornerstone of sound financial planning. You can make use of life insurance to grow and safeguard your money for the benefit of your financial well-being.
There is a wide range of life insurance products to choose from to suit your individual needs and means.
Why do you need life insurance?
Life insurance provides you and your family valuable financial protection against financial loss in the event you die unexpectedly or suffer from a critical illness or physical disability.
With adequate coverage, life insurance can provide you with an income during your retirement years, act as a financial back-up for emergencies or protect you against huge medical costs that you may incur.
* For protection
Life insurance can provide protection against life’s unforeseen events such as physical disability, critical illness or untimely death. When such unfortunate events occur, an insurance company will pay out benefits to the beneficiaries in accordance with your insurance policy.
The benefits are intended to cover financial needs of family members – most often parents, spouse and children – who are dependent on you for these needs.
With insurance coverage, you can be assured that your family’s financial needs are taken care of.
* For retirement
Statistics have shown that we are living longer. We run the risk of outliving our savings if we do not save adequately. Thus, it is prudent to consider ways to ensure that we have a comfortable income during our golden years so as to enjoy the lifestyle we have been accustomed to.
Life insurance can play a significant role in long-term retirement planning and providing an income during your retirement years. However, do not wait till you are close to retirement or have retired to consider the options. Planning should be done early, when you are much younger, so that the returns will be more beneficial in your senior years.
* For savings
Life insurance can be a vehicle that instills the discipline of saving regularly and still provides that much needed insurance coverage.
In addition, should the unfortunate premature death or disability happen to you during the protection period stipulated in your insurance policy, the sum insured will still be paid to you or your beneficiaries.
* For investment
There are life insurance products that offer the combination of savings and insurance protection, and at the same time, enables you to have more flexibility and choice as to how your premiums are invested.
This is typically suited for those who may like a higher potential for investment return. However, higher returns typically mean higher risks. In deciding which funds to invest in, you should consider your own risk appetite and investment horizon.
With the appropriate life insurance product, you can reap higher returns and still be assured that your loved ones are protected from financial loss when you are not around.
Labels: Life Insurance Facts
Friday, January 11, 2008
Term Insurance Plan
Term Insurance generally pays on death to provide financially for family members who are still dependant in the immediate months or years following. Hence, the premiums are not considered to be savings but are taken to be expenses. If death does not occur, there is no maturity payout upon completion of the duration of the policy. Therefore, a term insurance plan is typically 60 to 70 per cent cheaper than insurance plans with a savings purpose.
You can choose to have protection for a set period of time with term insurance. If you were to die or become totally and permanently disabled (if the benefit is provided) during that period, your immediate dependants will be paid a death benefit.
Level term products are the most popular plans purchased by individuals today. The level term can be from 10 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. This is to ensure that once you have been approved, accepted the policy and placed the policy in force by paying 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 a short grace period. If you need insurance beyond the term of the policy, the premium rates will increase and you will probably have to provide evidence of insurability at that time.
You can choose to have protection for a set period of time with term insurance. If you were to die or become totally and permanently disabled (if the benefit is provided) during that period, your immediate dependants will be paid a death benefit.
Level term products are the most popular plans purchased by individuals today. The level term can be from 10 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. This is to ensure that once you have been approved, accepted the policy and placed the policy in force by paying 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 a short grace period. If you need insurance beyond the term of the policy, the premium rates will increase and you will probably have to provide evidence of insurability at that time.
Labels: Term Insurance Plan
