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Is Term Life Insurance The Best Type Of Life Policy?
Author : Marilyn Katz
Many people think about purchasing life insurance policies. Some of them put off this purchase because they think it will take too much time to figure out how policies work, and which one is the best one for them.
While professionals spend a lot of time learning about all of the different types of life policies, it is very simple to grasp the basics.
Lots of people consider term policies. Let us look at some features of term policies.
Term life has no cash value. Also unlike these permanent policies, term policies end after a length of time (the term). It is considered pure insurance. These are the basic reasons why term is cheaper.
The advantage of a term policy is that it allow you to buy more coverage at a lower price. Because it will expire after a term, people generally use it to cover themselves for a period of time they will need to meet some financial goal. Some examples of this are paying off a mortgage or raising and educating kids.
Some term policies have an option to covert to permanent life insurance before the policy expires. This option also allows the individual to convert without having to show evidence of insurability. Say, for example you purchase a 20 year term policy. You can take advantage of this feature to change your mind later. You could, for example, change the policy to whole life. You will not have to answer health questions or take a medical exam. This is a good way to hedge your bets. Buy term now, and then have an option to convert to whole life later so you have retirement life insurance.
There is another solution to the fact that term does not build a cash value and expires. You can find some policies with a return of premium (ROP) rider. This costs a bit more but it refunds all of your premiums at the end of the policy. This can really add up. Let us say you purchase a 30 year term policy for $30 a month. At the end of the term, if you survive, you will get a check for over $7,000 back!
There is no doubt that, in general, term life offers more coverage for less money. It is just important for you to understand what you are buying, and also to think about your options after the policy expires. It may expire in five or thirty years. Of course, you will have aged, and you also risk having more health issues so you may be more expensive to cover.
How can you find a good term policy?
We compared term policies for an individual. This man was shopping for a hundred thousand dollar policy that would last twenty years. It was surprising to me when I did this. I found quite a difference between the premiums. In fact, the difference between the lowest and highest was about $300 a year. Over the whole 20 years, that would be a $6,000 difference.
So it is important to compare term life insurance quotes before you buy.
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Tags: term life, life insurance, whole life, insurance
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Submitted : 2010-07-26 Word Count : 1 Popularity: 231 Times Viewed: 21
