September is life insurance awareness month, we will use three blog posts to explain 3 considerations when shopping for life insurance products.
Determine What Types of Life Insurance Do You Need
To make an informed decision, you must first educate yourself on the various types of life insurance products available.
Term life insurance, which provides death benefit protection for a limited number of years (terms), offers the lowest premiums. That’s why most young people start off buying it.
The most popular policy types are 10- and 20-year term life insurance. But 5 to 40-year terms are available. These policies offer guaranteed level premiums. The longer the coverage period, the higher your premium will be. This is because insurance costs increase as you age. The insurance company calculates a level premium that will cover all the costs over the term period.
There is also an annually renewable term (ART) policy, where the premium covers one year of coverage at a time. These generally start out with a lower premium than level term, but become more expensive after only a few years. In general, ART only makes sense if you are only going to need coverage for a short period of time.
Permanent life insurance, generally whole life insurance and universal life insurance, offering a guaranteed death benefit for life, not just a defined number of years. In addition, permanent life insurance policies can also build cash value and, in some cases, the opportunity to earn dividends, which are not guaranteed.
As a general rule, a term life insurance policy offers the most basic coverage at the most affordable price for many people. Indeed, term insurance is usually quite affordable for those who are young and in relatively good health and is the kind of policy most people start out with. For this reason, the term life insurance market is very competitive.
This leads to some pricing tactics shoppers should be aware of. For example, some companies offer very low premiums for “super” preferred applicants, but only a small percentage of applicants actually qualify for that rate. So you may apply for their best rate, go through a medical exam, and a month later the insurance company offers you coverage, but at a higher premium rate.
In next blog post, we will explain Riders and Convertibility.
Determine What Types of Life Insurance Do You Need
To make an informed decision, you must first educate yourself on the various types of life insurance products available.
Term life insurance, which provides death benefit protection for a limited number of years (terms), offers the lowest premiums. That’s why most young people start off buying it.
The most popular policy types are 10- and 20-year term life insurance. But 5 to 40-year terms are available. These policies offer guaranteed level premiums. The longer the coverage period, the higher your premium will be. This is because insurance costs increase as you age. The insurance company calculates a level premium that will cover all the costs over the term period.
There is also an annually renewable term (ART) policy, where the premium covers one year of coverage at a time. These generally start out with a lower premium than level term, but become more expensive after only a few years. In general, ART only makes sense if you are only going to need coverage for a short period of time.
Permanent life insurance, generally whole life insurance and universal life insurance, offering a guaranteed death benefit for life, not just a defined number of years. In addition, permanent life insurance policies can also build cash value and, in some cases, the opportunity to earn dividends, which are not guaranteed.
As a general rule, a term life insurance policy offers the most basic coverage at the most affordable price for many people. Indeed, term insurance is usually quite affordable for those who are young and in relatively good health and is the kind of policy most people start out with. For this reason, the term life insurance market is very competitive.
This leads to some pricing tactics shoppers should be aware of. For example, some companies offer very low premiums for “super” preferred applicants, but only a small percentage of applicants actually qualify for that rate. So you may apply for their best rate, go through a medical exam, and a month later the insurance company offers you coverage, but at a higher premium rate.
In next blog post, we will explain Riders and Convertibility.
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