|
Cheap rates on term insurance
By
Christy Heady
• Bankrate.com
Term insurance is usually the least expensive form
of insurance coverage and is very affordable to purchase when you're
young. As you get older, your risk of dying increases, so the cost
of term insurance goes up. This risk is known as the mortality rate.
As with most other insurance coverage, you pay premiums
annually, semiannually, or quarterly for term insurance. For this
premium, you receive a predetermined amount of life insurance protection.
Term insurance is very inexpensive, which is why it's a popular
life insurance policy. However, it only provides for death
protection -- there's no buildup of the money you pay in premiums.
If you are the insured spouse and you die during the
term you are insured, your beneficiaries will collect. If not, all
of the premiums are gone since there is no cash buildup in the policy,
as there is in other types of life insurance policies that promote
savings features (and hefty commissions).
An interesting factoid: Young women who are nonsmokers
tend to pay the least amount in premiums for term insurance. Because the cost
of term insurance does not depend solely on age (where the younger you are, the
lower your premiums are), and women live longer than men, women will pay less
-- especially if they don't light up. Purchasing
a term policy
When you buy term insurance, you can
buy it with level (same) premiums for one year, called annual renewable term (ART),
and renewable until age 90. Other term policies and specified time periods are
typically 5, 10, 15 or 20 years. At the end of these time periods, the term insurance
is renewable at sharply higher premium levels because you are older and statistically
more likely to die. Some people refer to term insurance
as "renting coverage" because the only way your insurance policy pays out is if
you die during this period. The payouts are offered in a lump sum payment or a
steady stream of payments to your beneficiaries. You will
probably be required to take a physical examination to qualify for term insurance.
Make sure your policy offers a guaranteed renewability feature, so you don't
have to take a medical test to continue coverage for another term, especially
as you get older. Also, if you have an annual renewable term policy, you can convert
it to a whole-life policy -- without a medical exam. This is called guaranteed
conversion, and allows you to convert from rising-premium term insurance to a
fixed-premium whole life policy. Here's a tip: If you think
you may do this sometime down the road, make sure your term insurance policy is
convertible into a whole life policy without another medical examination. There's
an additional cost for this provision, but as you get older you'll end up saving
more in premiums by doing so and avoiding the medical examination. Here
are some things to keep in mind when looking at a term insurance policy: Make
sure the illustrations that your insurance agent gives you illustrate the rates
you will pay and shows the maximum guaranteed rate they can require you to pay.
There is a state law that regulates the maximum guarantees. But remember, policy
illustrations are not guarantees -- even if it's in black and white. Term premiums
are subject to change based on mortality and the insurance company's finances. Compare
a level premium term policy to an annual renewable term (which increases after
each term). You know that premiums on ordinary ART policies
increase in cost every year, right? Well, some companies offer a form of level
premium term, in which they project that the annual premium will remain the same
for 5, 10 or 20 years. At the end of the specified time period, your policy may
kick back into a policy that has increasing premiums every year, or remain level
for five years and then kick back into increasing premiums. Ask your agent if
the premiums are projected or guaranteed. Insurance companies are not obligated
to meet projected premiums -- even if they are in the illustrations they give
you. Don't always settle for a short-term
level term policy. Why? Because the premiums may skyrocket
after the short-term is over. Again, because this is the life insurance industry,
it depends on the policy. Make sure the agent explains all details in black and
white. Choose a guaranteed annual renewable
term to avoid medical exams. This ensures that you do
not have to have a new medical exam every year in order to renew your term policy.
Avoid those policies, which are known as reentry term. If
you would like quotes on term insurance, contact one of the following quote services.
There is no obligation to purchase term insurance, but make sure they can handle
the transaction in your state if you do buy a policy. - QuickQuote
(800/867-2404) maintains a database of 30 most competitive, A-rated term life
insurance companies and will search to find the lowest cost term insurance policy
based on your specifications, your age and your health condition.
- SelectQuote
(800/963-8688) tracks over 1,400 companies for term insurance prices nationwide.
--
Posted: July 28, 2004 | 
