Carey Williams

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Term Life Insurance

Features:

  • the style that most frequently pops into people's minds when life insurance is pondered
  • it is typically the most efficient in meeting most buyer's needs. 
  • It provides a fixed death benefit only for a limited number of years (the "term")
  • the policy owner pays a level premium for the duration of the policy's "term".  However, you are not obligated for the entire term.  At any point, you can terminate the policy & stop paying premiums
  • At the end of your policy’s term, your payments and your coverage both cease.
  • You may have the opportunity to renew your term policy. However, at MUCH higher rates.



Types of Term Coverage:

  • Annual Renewable Term (ART) - is a life insurance policy which lasts for a one-year term.  This is, in fact, the fashion after which all life insurance was originally administered.  After the one year term, you can renew your policy, but the premium will increase to reflect your increased age.  In today's marketplace, not many insurance carriers offer this type of coverage due to the competitive structure of 10, 15, 20 & 30 year policies that offer level premiums which are competitive with the ART's first year premium!
  •  10, 15, 20 & 30 Year - have been most popular with consumers
  • Term to 100 - a little more pricey...yet substantially less than the permanent style coverages (Universal, Variable & Whole)
  • Decreasing Term - There are life insurance policies sold specifically as mortgage (or credit) life insurance policies.  The death benefit of such a product decreases in accordance with your decreasing mortgage (or other debt) so that the death of the beneficiary will, at any time, result in a payment exactly large enough to cover the debt.  The original design of these policies was to have a decreasing death benefit to make mortgage life insurance less expensive than ordinary term life insurance.  However, these policies are somewhat obsolete because they are not competitive in today's marketplace where you can purchase level term policies for about the same overall premium outlay.  I DO NOT RECOMMEND THIS COVERAGE
  • Credit Life - was originally designed as a convenient product which covers an outstanding debt.  It adapts perfectly to your specific debt.  The size of the death benefit is always equal to the cost to be covered and the premium you pay is derived from the current amount owed.  Therefore, as you amortize the debt, your credit life insurance policy automatically shrinks and therefore reduces the premium.  A credit life insurance policy’s beneficiary is the creditor—not the insured’s family.  It pays off debts immediately and secures survivors’ ownership of their possessions.  Some organizations that sell credit life insurance are not actually life insurance producers, and when their goal is anything other than getting you the best life insurance at the best price, you may end up with a financial burden which does not actually serve you in the least.  Overeager buyers have sometimes actually failed to notice that they are paying for a credit life insurance policy.  Credit life insurance policies can be concealed within a loan agreement or within a purchase agreement. I DO NOT RECOMMEND THIS COVERAGE
  • Return of Premium (ROP) Life Insurance - It is an agreement between you and the life insurance company (carrier).You agree to pay premiums. The carrier agrees to pay your beneficiaries a sum of money if you die. With ROP term life, at the end of the guaranteed term period, the carrier will refund or return all of the premiums you have paid. This means that at the end of the term period, your net cost will equal zero. The main reason people don't get ROP term life insurance is that it costs more (up to three times higher)



Considerations:

  • Your INSURABILITY.  Let's say you are healthy now but later on during your policy term a serious health condition develops that ultimately makes you a higher risk to insurance companies.  When your policy expires, you will have to face higher rates OR if your condition is very serious...the possibility that no insurance company will be willing to offer you coverage at all!  So, if this is a potential concern, then I strongly urge people to consider the longest period of coverage that they can afford OR consider other styles of life insurance that are deemed to be "permanent" life insurance (versions of whole life insurance and universal life insurance.)
  • If you already have some health issues, you may be able to get a certain level of coverage through your employer on a  "Guarantee Issue" basis at attractive rates.  However, if you leave this employer, you may not be able to take this coverage with you
  • If you have young children, debts and liabilities, own a business, or want to leave behind a legacy, then term life insurance may be right for you

Reasons to Purchase Term Life Insurance: 

  • Cover debts / liabilities (e.g. home mortgage / funeral costs).
  • Maintain a spouse's standard of living.
  • Provide income for children until they become adults
  • Pay for daycare, schooling or college education.
  • Fund a Buy/Sell Agreement for a business so the remaining business partner(s) can continue running the business
  • Protect a business from substantial income loss in the untimely death of a key employee.
  • Protect an Estate against liquidation





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