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At TermLifeInsuranceMadeSimple.com, we think it is extremely important that you be well-informed prior to selecting a term life insurance policy so that you can make the best decision for yourself and your family. We've formed this life insurance FAQ to answer some of the basic questions about life insurance, the process, and the various types of coverage. Once you feel comfortable with the foundational concepts, move on to our Needs
Estimator or term life insurance quote tools to give yourself a better sense of which policy best meets your requirements and budget.
What is life insurance? Life insurance is a safety net that triggers in the event of the death of an individual. It is meant to replace the loss of income that occurs when the insured passes away. A policy, or a contract, exists between the insured individual and the company, or "carrier," to cover the costs specified. If the insured person dies while the contract is still in effect, the carrier pays the specified amount of money, or death benefit, to the people named as beneficiaries by the insured. The beneficiaries then, in most cases, are allowed to use the income tax-free benefits in whatever manner they please.
How much life insurance Should I be looking to buy? The amount of life insurance you buy should exceed the lost income that would occur if you were to die. Funeral expenses, inheritance taxes--among other things--should also be accounted for when considering the amount of necessary life insurance. Furthermore, your family's future needs must also be calculated, including a college fund for your children, and the retirement needs of your spouse. Our Needs
Estimator can help guide you towards the best life insurance policy, and can keep you informed about life insurance and the different factors to consider.
What is term life insurance? Term life insurance is a very straightforward type of coverage that is perhaps the easiest to comprehend. Known within the industry as "pure" insurance, this policy has no financial investment value, and most of the premium goes towards paying for the coverage. Term life insurance is usually seen as the most cost efficient method.
What are the differences between
term life insurance and other types of life insurance? The two types of life insurance are permanent and temporary. Term life insurance is temporary, given that is provides coverage for a specified period, or "term." The beneficiary is paid if death occurs during the covered period. The coverage ends upon completion of the term if the policy isn't renewed. Should death occur after this period, cash benefits are not dispersed.
Permanent life insurance includes universal
life, and whole term life insurances. These policies have a monetary value that can be obtained by cashing out the policy, or by borrowing against it. While this practice may sound enticing, financial experts concur that this should not be viewed as the policy's primary purpose. Since term life insurance policy premiums are typically cheaper than those of permanent policies, a higher level of coverage is therefore more affordable. The different types of term life insurance are covered later in our life insurance FAQ.
What types of term life insurance are available? One of the frequently asked questions about life insurance pertains to the different types of term life insurances available. This is addressed here in our life insurance FAQ.
» Annual Renewable Term life insurance that is automatically renewable annually up to a set age (usually 65, but can vary). Your premiums go up as you renew each year, since the chances of dying increase statistically as you age. If you purchase a policy when you are young and in good health, you can have access to significant coverage at a low premium.
» Renewable Insurance that allows you to automatically renew your coverage following the end of your policy (usually 5 to 20 years), even if your health has declined. This is a similar method to annual renewable, but covers a longer period of time. The ability to renew your policy is a valuable feature, given how much can happen in the span of 5 to 20 years. With this feature, however, comes a greater cost in premiums, since the financial liability of the carrier increases. The conditions for renewal vary from company to company, and can include a change in degree of coverage for the same term, or similar coverage for a different term.
» Level This type guarantees that your premium will stay the same for each year of your term life insurance policy. Insurance companies do this by charging you the average of what premiums would cost for an annual renewable policy. You will probably end up paying more during the early years of the policy than in the later years, compared to an annual renewable.
When you apply for a new policy at the end of your term, you'll more than likely experience a large hike in your premiums as well. The advantage of a level policy is the consistent price of coverage throughout your term. If you change policies, however, you may wind up over-paying for coverage.
» Decreasing Your cash benefits decrease annually while your premiums remain the same for the duration of your policy. Decreasing term is generally used for mortgage payment protection insurance, or to cover the depreciation of other items over time. This isn't the smartest choice for a general life insurance plan, as your needs tend to increase over time.
» Convertible Term life insurance that can be converted into any other type of coverage offered by the issuing company. This is particularly advantageous should your insurance needs change over the course of your term, which is extremely common. Given the risk to the carrier, however, these policies tend to come with higher premiums.
Do I need to have a medical exam
to qualify for term life insurance? Term life insurance companies typically require a medical exam. In the event that an exam is necessary, it will take place at a time and location that is convenient for you, and will be covered by the insurer. Some carriers require an exam for all offered policies, while others will only need them for policies with significant monetary values. The exam is standard, and covers your weight, height, and medical background, as well as a test of your blood and urine. Should your blood or urine tests elicit positive results for drug use or health issues, your premiums may be affected, or in some cases, your ability to purchase coverage.
What term should I choose? Many factors go into selecting the proper term, such as the age of your children, years before you retire, and more. Being insured until retirement, usually at 65, is an attractive notion that can provide much needed security. Some have plans until their youngest child graduates, so as to have college tuition and other expenses covered.
Many experts suggest that you should be insured at least until your youngest child is 18. Therefore, if your youngest is 3-years-old, you'll need 15 years worth of insurance. This doesn't mean signing into a 15-year-term, however. You could, for instance, look at an annual renewable policy, renewed annually for 14 years. Comparing the different rates and policies, and making adjustments for the value and duration of the coverage, will help you determine the best solution for you and your family.
What happens when the term ends? That depends on what type of term life insurance you've selected. With standard term, your policy ends, and you need to re-apply to regain coverage, which includes another medical exam.
Renewable term policies, on the other hand, guarantee you the right to purchase another term without having to re-apply. Convertible
term policies grant you the ability to convert your coverage to another type, such as universal life, or another term period. Expect an increase in your premiums
with this option, however.
How is my premium be determined? As mentioned earlier in our life insurance FAQ, age, weight, height, medical background, and family history all go towards determining your premiums. Your coverage choices, such as the term and guaranteed premiums, also contribute to the total that you'll pay.
does the application process involve? So you've gathered the basics about life insurance via our life insurance FAQ, reviewed the varying terms of coverage, and examined quotes using our term life insurance quote tools. You're now ready to select the term life insurance policy that best meets your needs by clicking the "Buy" button. You'll
Once we've received your application, a licensed agent from TermLifeInsuranceMadeSimple.com and Kelsey National Corporation will get in touch with you. If your term life insurance company requires a medical exam, your agent will set up your insurer-covered appointment for a time and
place that is most convenient for you. It can take place at your home or office, and will be administered by a medical professional.
Once this process is complete, the agent will submit your information to the term life insurance company. The underwriting and issuing process for your policy takes somewhere between four to
eight weeks. Then you're all set!