Proper financial planning may include a solid Life Insurance policy that could protect your family and loved ones from the difficulties of maintaining a stable and secure lifestyle in the event of a premature or unexpected passing. Life insurance can help create financial security for you and your family as it can be used to:
- Pay final expenses and any debts
- Provide an income for your family
- Ensure your family has the resources to maintain a comfortable standard of living
- Leave your desired contribution to a favourite charity
While you’re still living, some life insurance policies can:
- Build tax-advantaged savings you can draw upon as needed for personal or business opportunities
- Supplement your retirement income or provide for long-term care or home care for yourself or a family member
The following is a brief explanation of the various types of Life Insurance Policies available:
Term Life Insurance
Term Life Insurance is Life Insurance which provides coverage at a fixed rate of payments for a limited period of time. Term Insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
Available Terms of Coverage for Term Life Insurance are:
- Annual Renewable – Premium increases every year
- 5 Year Term – Premium increase every 5 years
- 10 Year Term – Premium increases every 10 years
- 20 Year Term – Premium increases every 20 years
Term Life Insurance policies do an excellent job of meeting immediate and fixed time period needs such as loans, mortgages or family protection. Premiums are guaranteed for the duration of the coverage, even the subsequent renewal years. Your policy automatically renews at the end of the “term” without your providing proof of health to the Insurance Company. However, the increase in premium or price can become substantial in later years, causing many people to terminate policies in their retirement years even though they may still have a need for insurance coverage. Also, it is important to remember that the majority of term policies will terminate coverage at age 75 or 80.
Term insurance is well-suited to meeting large, short-term protection needs for the lowest initial cost. For example, if you have purchased a home using a mortgage amortized over 25 years. A Term 20 Life Insurance Policy will cover the initial 20 years of your mortgage for the least amount of cost. Or perhaps you have purchased a new car that requires life insurance coverage, a 5 year or 10 year Term would be the answer for you!
Term Life Insurance provides you the option to later change or convert your current policy to a Permanent Life Insurance policy with the same Insurer without providing proof of health. Two important points to remember regarding conversion of a policy is:
- The insurance company usually offers a select number of Life Insurance contracts that you can convert to
- The Conversion privilege usually expires around age 65 or 70.
Comparing Term Insurance Products
There is absolutely no doubt that many consumers will purchase Term Life Insurance on “PRICE” alone!
However, just like any other product that you may purchase, there are many other considerations that you should be aware of when making your decision to buy.
What to look for in an Insurance Company?
- Does the company consistently receive excellent ratings from several internationally-known rating agencies?
- Does the company have the capital to grow and to compete in an increasingly competitive environment?
- Does the company treat its existing clients fairly?
What to look for in a Term Life Insurance product?
- Is the product convertible? For how long?
- Does the product offer no medical underwriting for most policies?
- What permanent products are available to convert to?
- How long is the product renewable?
- Are the renewal rates guaranteed? Are they competitive?
- Does the product offer lower rates for healthier clients? How difficult is it to qualify for a company’s preferred rates?
- Are preferred rates offered when converting to a permanent plan?
- Does the product offer a range of coverage options all in the same plan?
- Does the product offer the flexibility to change as client’s needs change?
- Does the product offer a range of competitive riders to custom design solutions to meet your unique needs?