Term Life: Low Rates—High Value—Limited Time

If you need a high dollar amount of life insurance protection, but won’t need it “forever” and have limited dollars to put into it, Term Insurance may be your best option. While it won’t last your entire life and is not practical to renew at the end of the term, it is a low priced way of getting a high face value of coverage. And if you are young enough, you may be able to get a level premium for as long as 30 years.

When purchasing Term Life, it’s important to understand what it is and what it isn't. Generally, it is NOT an option for people who are close to retirement or for seniors. That’s because most policies are either not renewable after age 85 or are so expensive that your annual premium can be 50% or more of the entire face value of the policy. And, after a certain age, you may not be eligible for any other kind of insurance to replace it.

Term Life is for people who have an obligation that will not last their entire lives. Examples include a growing family, a large mortgage or other debt, a business that would need money if you, as the owner or key person should die, or other obligations that will be satisfied at some point in your life. Furthermore, when you purchase Term, you should also have a plan for investing for future years when the Term has expired. Funds will be needed later for final expenses, to support a spouse, and to pay inheritance, estate, or any other outstanding taxes. If you purchase Term insurance for the right purpose and with a full understanding of what it will and won’t do, it is a very good option.

When you meet your agent, you want to ask the following questions:

• Does the policy have conversion options? Is it possible to get credit for what has already been paid? Some carriers offer a conversion to an individual whole life policy while other companies may only covert to decreasing term or annual renewable term.
  
  
• How does one calculate the increasing cost after the initial Term expires?
  
  
• What riders are available? Do they expire at the same time as the primary policy or earlier?
  
  
• What would be the actual cost of whole life if you took it now versus having the same amount in Term now and a new whole life policy 20 years from now?
  
  
• On a child rider, at what maximum age can the child convert to whole life? With some policies it is 21, at others 23 or 25. You don’t want to be surprised by this.

• If you take the disability rider, does it expire at a certain age, or will it renew the policy for life if you become disabled?

Finally, be careful about purchasing Term or any other kind of insurance through the mail without letting a licensed professional review the offering. Companies have their own conversion options and rate charts, and the language is not standardized from one policy to another. Most people who were eventually disappointed in their decisions admit that they purchased the policy and filed it in a drawer or box without ever making sure they really understood it. It's worth a few minutes of your time to make sure you get what you really wanted.

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