What exactly does term life insurance mean?
Life Insurance
Question by JON Z: What exactly does term life insurance mean?
I have been paying in to a Chase Life term insurance policy for $ 100,000.00 for over 10 years.
I have recently received a quote for $ 250,000.00 term policy for LESS than I am paying for the $ 100K policy.
Do I lose anything by changing companies?
Best answer:
Answer by Caveat Emptor
Compare the terms. What is the term of your current policy: 10 years? 20 years? 30 years? And what is the term of the policy quoted? The term (length) of the policy affects the premium cost – as does your age and the medical underwriting.
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Tags: Insurance, Life, Mortgages, term, term life assurance, what does it mean when a term life policy matures
Term life insurance – Life insurance payable to a beneficiary when the insured dies within a specified period. If the insured is living at the end of the period, the policy expires without value.
Maybe, maybe not.
Rates HAVE come down. But you need to compare COVERAGE. How much time is left on the old term policy? Do you have a “guaranteed renewable and convertable” rider on it? How long is the NEW term quote good for? Is it binding, or just a bait quote?
If you DO decide to switch, DO NOT cancel your old policy, until the new one is SOLIDLY in force.
There are two main types of life insurance. One is whole life, and the other is term life. Whole life policies are permanent forms of life insurance that build cash value and pay out upon death or often at age 100 (whichever comes first). Term life insurance is a temporary form of life insurance meant to provide coverage for a specific time period when you have a need for protection now that you wont have later on. Term life products often come in terms of one, five, 10, and 20 years. Term life products do not build cash value. One major benefit of a term life product is its affordability. Often at a younger age, you may purchase a higher amount of coverage for less than a whole life product. However, the premium on term insurance goes up over time, eventually exceeding the cost of a whole life policy and then becoming too expensive for most to afford. Also, a lot of term insurance will have reduced benefits at retirement age and some will even completely cancel. That is also why life insurance provided by your employer is often called group term life. When you leave your employer for any reason, you lose it.
I would recommend that you compare the policies side by side to see what benefits each offers and the conditions and limitations outlined. Also you have to be very careful when switching insurance companies especially when you are offered a lower rate for more coverage. Often, you get what you pay for. If you are looking for a cheaper rate and don’t care about service, you will get more coverage for your dollar. However, it may take a long time before they pay claims and they may not help you when you need to make changes to your policy. Some companies who provide cheap insurance may try to get out of paying claims. Companies who sell cheap insurance may go out of business if claims come in quicker than the company can collect premium. Also the cheaper the insurance, the less likely it is that you will ever see an agent. The company that I work for isn’t the cheapest on the market, but we still believe in the handshake and face to face interactions. Also we pay claims on average in under 8 days. We are also the only company whose group term product for employees is a permanent coverage to age 100 and is 100% portable, meaning that you can take it with you when you leave your employer, keeping your full coverage amount and your premiums never increase. And because we don’t advertise, we use those millions of dollars in extra savings to provide free introductory offers, such as our free $ 3,000 accident policy that covers your whole family.
So now you should have a good idea of what Term life insurance is and how it compares to Whole life insurance. Also, I have shown you how big of a difference there is in customer service based on how much you are willing to pay for your life insurance.
And most importantly, never be afraid to ask a lot of questions to get the answers you need when choosing between companies.
Term life insurance is exactly as it is called…insurance that lasts for a specified term, or period of time. The longer the term (10, 20, 30 years) the more it costs. Depending on how old you are, what your health status is, and how much insurance you are looking for will figure in on the premium. If your current 100,000 policy is more than the 250,000 quote there are a couple of reasons why that may be. First, your current policy was written before you were 21 years old which always is a little more expensive. Second, your current policy is for a much longer term. Third, you are being quoted the 250K at the best possible rates before you are even properly rated by the underwriting process. Fourth, the 250,000 quote could be an accidental death policy instead of a standard policy. In short, you need an agent to walk you through the process. If you have an auto or home agent, he/she would be the first one to talk to as a policy through them might also discount your auto or home policy by having it bundled in the same company. There are a lot of variables involved with life insurance and you are not going to get as comprehensive an answer as you need through Yahoo. I wish you luck and good health.
Term insurance is designed to provide death protection for a definite and limited period of time such as One Year Term, Five Year Term, 30 year Term, or Term to 65. If the insured dies during the term, the policy matures and the insurance company pays the face amount of the policy to the beneficiary. If the insured doesn’t die during the term, the policy expires.
The second most important characteristic of Term insurance is that it is pure insurance. You pay premiums only for the coverage. Since there are no forced savings or cash value attached to Term insurance, it is designed to provide the greatest possible protection for the lowest possible cost. Therefore, the two key points to remember about Term insurance are that if offers (1) protection only for a (2) a specified period of time.
One of the most widely marketed forms of Term insurance is Annually Renewable Term (ART). The insurance company grants the insured the right to renew the policy each year to a stated date or age. The cost to renew the policy goes up each year because the rates are based on the insured’s attained or current age.
The increasing in premiums can present a real problem for the insuring public. One Term product that provides a partial solution to the rising costs is Level Premium Term. With a policy of long duration, the payment may be leveled out over the life of the policy to create Level Premium Term. The cost of Level Premium Term is calculated by price of the early years by the price of the later years. So in the beginning, you are making an overpayment of what the actual cost of insurance is. But in the later years, you are making an underpayment of what the actual cost of the insurance is. Why? Because the cost to insure someone is young is low compare to the cost of insuring someone who is old.
Term insurance, then, in any of its many forms, is the most affordable protection available for the premium dollar. It is particularly suitable for a person who only need temporary need for protection, for a person who may want permanent insurance in the future, or for the person who has the discipline to buy Term and really invest the rest.
So much to look out for here.
First: Is the policy you have convertable? (Can it be converted into a permanent plan) What about the 250,000 plan, same question.
Second: How long does your policy stay in force? Till age 50, 75, 95, ect?
Same question for the 250,000 plan.
Third: Which company is the most financially sound? Go to http://www.TheStreet.Com and check out their financial strength. Next look at A.M. Best, Moody’s, etc. and look at their assets and how they spend your money. Who should you be relying on to pay the benefits when the time comes?
Fourth: Do you have a dividend paying term? What about the 250,000 plan?
Fifth: How long is the rate locked in? Both policies.
Sixth: Every life insurance policy has a contestibility period. It’s usually two years. That’s the amount of time a policy must be in force before the company cannot question your application/eligibility. You’ve outlived the contestiblity period with your current policy. You will be starting over with the new policy.
Finally: Is the rate you’re being given based on an elite or preferred class or is it a standard rating? There are lots of companies out there who will quote you “best case scenario” then once tha application is concluded, few people qualify for those rates.
Good luck to you, lots to ponder.