Life Insurance Questions & Answers: Term Life
Term Life Q&A
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How do you help a client decide between term and whole life insurance?
It starts by understanding the need. There are situations where one or the other makes sense. Some you do a blend between between the two. It comes down to the individual situation and also what is affordable. Always best to consult a life insurance advisor to find the right solution and pricing.
Is whole life insurance better than term life insurance?
Whole life insurance is not automatically better than term life insurance, it simply serves a different purpose. Term life insurance provides the most death benefit for the lowest cost and is usually the best choice for protecting your family during your working years or while you have a mortgage or young children. Whole life insurance costs more, but it provides lifetime coverage, builds guaranteed cash value, and can be a useful tool for long-term financial and estate planning. The best choice depends on your goals, and for many people, the ideal solution is a combination of both, using term insurance for affordable protection and whole life for permanent needs.
What is the difference between level term and decreasing term life insurance?
Level term features a consistent premium payment with a death benefit that also stays consistent. You make the same payment for the term and if you pass, the full death benefit is available.Decreasing term features a consistent premium payment with a death benefit that *decreases* over time. Usually these are used with, for instance, a mortgage that decreases over time.
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.
How long should my term life insurance policy be — 10, 20, or 30 years?
This depends on your individual needs and personal wants for the policy. Not all companies offer 30 year term policies. There are also tiered prices depending on the death benefit amount which could make a longer term policy more affordable.What happens if you outlive your term life insurance policy?
Outliving your life insurance is not a bad thing. However if a need is still there for it the cost will skyrocket after the term is over. In many case once the term is over not as big of a benefit is needed. Which is why when buying a term policy when you are young is good but also having a small permanent policy that is paid for in 15-20 years along with the term is a good idea.
What is term life insurance and how does it work?
Term life is insurance that does not have any value as far as cash value is concerned. So you have ordinary lie versus term life. An individual can secure a bigger policy if they qualify and they can for a permanent policy when it comes to getting coverage but the caveat is is that at some point your term policy will and most cases most people do outlive term life. Permanent insurance is for your whole life and you could actually probably compare term life to a universal life policy and that would give you an affordable option for permanent life insurance but it still will be more than a term policyWhat's the difference between term and whole life insurance?
To keep it simple term lasts for a certain amount of time for example 20 year term for 1 million dollars is $100 a month. None of that changes during the 20 years as long as premiums are paid. It is the greatest value for the dollar. Whole life is permanent so the same million could cost $400 a month but depending on the policy it can be fully paid in a certain time frame and have the ability to purchase additional coverage even if you are not insurable. The solution is different for everyone.
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.What's the difference between IUL and term life insurance?
An indexed universal life policy is a permanent policy. A term life policy is coverage that lasts for a 'term', which is a set amount of time usually ranging from 10-30 years (not all carriers have terms that long but that's a general guideline).IULs can earn cash value and a lot of folks do get a policy for children, for instance, so the value can grow over a lifetime. IULs are tied to index performance and will experience gains, and many have a 0% floor to protect policyholders from loss.
Term life is for a period of years and if renewed the policyholder will pay more for the next term, though some policies can be converted and others do offer a return-of-premium.
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How Life Insurance Works (36) New to Life Insurance (22) Rates and Costs (21) Coverage (20) Eligibility (20) Financial Planning (17) Advice for Beneficiaries (14) Term Life (10) Whole Life (9) Advice for Families (9) Riders and Addons (5) Life Events (4) Universal Life (3) Retirement (2) Final Expense (2) Agent Interview (1)Have a Life Insurance Question of Your Own?
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