Affordable Life Insurance Protection for Your Family
What is the Best Type of Life Insurance?
When considering the purchase of a life insurance plan it’s important that you consider what type of coverage may provide you and your loved ones with the protection you need.
But, how do you choose the right life insurance plan?
First, consider how long you need life insurance, what you can afford to spend, and how much life insurance will meet your needs.
Then, take a look at your options for life insurance:
What’s the Most Popular Type of Life Insurance?
Level Term Life insurance is a life insurance policy that will pay a beneficiary if you die within the period of the term.
Usually the term is 10 or 20 years, although a few companies have 5 year or 15 year terms, and some also offer a 30 year term.
The word "level" means that both the premium and the face value remain unchanged for the duration of the term.
Very few people purchase annual renewable term life insurance because, while the premiums start even lower than level term, they increase every year with increments that get larger as you get older.
Level term life insurance has the same premium for the life of the term.
The other variation–Decreasing Term–is the least expensive of all because, while the premium remains unchanged, the face value drops every year, giving the company the greatest risk in the early years of the policy when you are least likely to die.
If you want term life, your best choice will be level term life insurance.
Some companies also offer "modified term" policies that start with a premium even lower than regular term but increase at periodic intervals such as every five years.
Modified term is usually offered through the mail or through telemarketing and is often not fully explained. It's always better to work with a real person.
Pros and Cons of Term Life Insurance
Term Life insurance is very inexpensive and is therefore often a good option for families with child rearing expenses and large mortgages.
A drawback, however, is that it does not build cash value, meaning that at the end of the term, you can discover that you have paid for 20 years of coverage, but suddenly have no insurance at all.
A company that offers other types of insurance will offer you the opportunity to convert to whole or universal—or to any other kind of insurance it may offer.
A company that offers only Term—and there are several—will only be able to offer an extension on the term—at a much higher price or at a lower face value, or will offer a decreasing term or an annually increasing term, neither of which are preferred by most people.
One good point about purchasing a term is that if the company offers you a desirable conversion, it will be without medical underwriting.
Thus, you can purchase a term early in life—if that's all you can afford—and can convert to another type of insurance even if you develop chronic medical conditions.
Options with Term Insurance
Most term life policies are available with a variety of riders such as the spouse rider, the children's term rider, the waiver of premium rider, the accidental death rider, the unemployment rider and several others.
The waiver of premium rider is worth mentioning specifically. This rider waives the premium for the primary insured if that person becomes disabled prior to the age of 65.
The rider obligates the company to pay the cost of insurance both to continue the original term and to renew it annually when the original term ends.
Waiver of premium effectively converts a term policy to whole life—but without the benefit of a cash value.
Of course, you must be physically disabled for this rider to take effect. Nevertheless, since 60 percent of individuals under the age of 40 are more likely to become disabled than they are to die, this rider is well worth including.
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