Life Insurance Questions & Answers: Term Life
Term Life Q&A
Showing 8 questions
How do you help a client decide between term and whole life insurance?
By asking the right questions.Determining if they're looking for something short-term (out of work, bought a house, had a baby, etc) or permanent (wanting to build cash value, static premium for life as long as premiums are paid). Finding this out alone can guide the conversation.
In some cases, maybe the client has less resources but expects to have some within a period of time. Since term life is less expensive for a larger death benefit, sometimes this makes sense until they can get into a whole life policy.
Ultimately, learning their overall goals and needs is critical for guiding them in this decision. Oftentimes clients will have a blend of both.
Is whole life insurance better than term life insurance?
Each of these types of insurance serve a different purpose. So one is not better than the other when used at the right time.Term insurance is typically used to protect survivors from an unexpected loss of a provider. It can be a replacement for income and used to pay for mortgages and future education. It is used for a specific term in a person's life.
Whole life insurance helps with final expenses, wealth planning and wealth transfer. It is meant to last throughout a person's whole life.
The best use for either type of insurance depends on a person's specific situation. Often times a combination of both provide the coverage needed at one point in life and the other type of insurance becomes more important later.
What happens if you outlive your term life insurance policy?
If you outlive your term life insurance policy, the coverage simply ends and no death benefit is paid. Depending on the policy, you may have the option to renew it, convert it to a permanent policy, or purchase a new policy.
What's the difference between term and whole life insurance?
I'll give you the third grade response. Term insurance is renting the insurance. Nobody dies nobody gets paid. Whole life insurance is generally more expensive has cash value and can accumulate equity in the policy accessible by the insured for loans or cash withdrawals or premium payments etc. In between those two types of products in the product called universal life which is a mid-range cost product with same or similar features as a life policy without the higher cost. Some offer a flexible premium meaning the insured could be the premium amount for owner could vary the premium amount to fit their budget
What is the difference between level term and decreasing term life insurance?
**Level term life insurance** keeps the **death benefit the same** for the entire term.**Decreasing term life insurance** has a **death benefit that goes down over time**, usually while the premium stays the same or close to the same.
## Level term
Example:
You buy a **20-year $500,000 term policy**.
If you pass away in year 2, your beneficiary gets **$500,000**.
If you pass away in year 19, your beneficiary still gets **$500,000**.
Level term is commonly used for:
* Income protection
* Family protection
* Mortgage protection
* Children’s future expenses
* Debt protection
## Decreasing term
Example:
You buy a **20-year decreasing term policy** tied to a mortgage.
In the early years, the policy may cover close to the full mortgage balance. Over time, as the mortgage balance goes down, the life insurance benefit also goes down.
Decreasing term is commonly used for:
* Mortgage protection
* Business loans
* Debts that shrink over time
## Main difference
| Type | Death benefit | Common use |
| ------------------- | ------------------- | --------------------------- |
| **Level term** | Stays the same | Family income protection |
| **Decreasing term** | Goes down over time | Mortgage or loan protection |
What is return of premium life insurance and is it a good deal?
Return of Premium (ROP) life insurance is a type of term life insurance that refunds some or all of the premiums you paid if you outlive the policy term. For example, if you purchase a 20-year return of premium term policy and are still living at the end of the 20 years, the insurance company may return the premiums you paid during that period.At first glance, this can sound very attractive because it addresses one of the most common objections people have to term insurance, namely that they may pay premiums for years and never receive a benefit. However, return of premium policies typically cost significantly more than traditional term life insurance policies.
In my experience, return of premium life insurance is usually not the best value for most people. The additional premium required to obtain the refund feature can often be invested elsewhere with greater flexibility and potentially better results. When I compare options for clients, a traditional term policy combined with a disciplined investment strategy is frequently the more efficient solution.
That said, there are situations where return of premium coverage may appeal to individuals who like the idea of having a guaranteed refund if they outlive the policy term and who value that certainty over maximizing potential investment returns.
As an independent agent representing virtually all major life insurance companies, I evaluate both options when appropriate. In most cases, however, I find that clients are better served by purchasing the coverage they need at the lowest reasonable cost and putting the premium savings to work in other areas of their financial plan.
Can you convert a term life insurance policy to permanent coverage?
Yes, term life can be converted to permanent coverage. However, there will most likely be a substantial increase on the monthly premium. But for some this might be a good thing if one's health has worsened to the point of being uninsurable.
How long should my term life insurance policy be — 10, 20, or 30 years?
It varies depending on whether you want to cover a home mortgage in the event of a death to protect your family or if you have other requirements. Keep in mind that carriers have stricter health and age requirements to get approved.Browse Other Questions & Answers
How Life Insurance Works (27) Coverage (18) New to Life Insurance (17) Eligibility (13) Advice for Beneficiaries (11) Rates and Costs (10) Financial Planning (9) Term Life (8) Advice for Families (8) Whole Life (7) Riders and Addons (5) Life Events (4) Retirement (2) Universal Life (2) Final Expense (2) Agent Interview (1)Have a Life Insurance Question of Your Own?
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