Level Term Life Insurance: A Quick Guide
What is level term life insurance?
Many people do not realize that level term life insurance is an affordable way to protect your loved ones. It is easy to understand and allows you the flexibility of choosing the term of coverage and the amount of death benefit. Also, the premiums you pay are level for the entire term selected.
For example: A healthy male age 35 can purchase a 20 year term policy with a $500,000 death benefit from an A+ rated company for $255 annually, which is about 70 cents a day! The proceeds can be used to cover dependant care, educational expenses, mortgage payments, consumer debts, provide income replacement, etc.
Level Term Life Insurance Tips to go by:
1) Level Term Life Insurance is relatively inexpensive.
Because Level Term Life Insurance is typically very affordable, there is very little reason to go completely uncovered.
2) If you have dependants you need insurance.
Dependants include children that you support financially and in some cases older relatives (parents, grandparents, etc.) that you support financially. Also, if you have a spouse you should have insurance.
3) You should buy level term life insurance when you are healthy.
Ideally you should buy insurance when you are healthy. This will ensure that you get a low rate for the term you choose. The sooner you buy insurance the better, because obtaining a policy is more difficult and more expensive as you get older.
4) Buy insurance to meet your specific needs.
Add up your outstanding debt (mortgage amount remaining, car loans, credit card debt, etc.) educational expenses (the amount you would want to set aside for each of your children’s future educational expenses), income replacement amount (consider how much your surviving spouse would need in order to replace the income lost if you were to pass away), final expenses (consider an amount you would want to set aside for your funeral bills and also for potential end-of-life medical expenses). Adding up the amounts from these categories will give you an adequate amount of insurance to buy. Keep in mind that the amount of insurance you would like is always up to you. If you feel you cannot afford to insure all 4 categories mentioned, insuring for just one, two, or three of the categories would be beneficial to your survivors. For more info see: How much insurance do I need?
5) How do I choose a term length?
In choosing the length of the term it is advisable to buy a term policy to cover your dependants until they are able to provide for themselves. Another appropriate term length would be to buy a term policy that will give you coverage until your spouse reaches retirement age. Other ideas would be to choose a term length that coincides with the time you will be finished paying for your mortgage or finished paying for your child’s education.
6) You can drop your term coverage at any time!
Let’s say that you qualify for and obtain a policy with a 20 year term and you are paying premiums monthly. In order to keep the coverage and maintain the same premium cost per month then you must keep up with the monthly payments. However, if for any reason you wish to drop your coverage just stop paying the premiums and there is no penalty. If you were paying premiums annually and midway through the year you wanted to stop your coverage the insurance company will reimburse you for the months that you already paid coverage for. If you are dropping your current coverage to try and go with a less expensive company, do not drop your policy until you have qualified for the new insurance with a better rate. Once you drop an existing policy you have with one company, you will have to go through underwriting again to get that same policy back. And, because you will be slightly older in age, the same amount of coverage will cost more in premiums.
7) You can buy several policies.
Let’s say you are 35 years old and currently have a 30 year term policy to provide replacement income to your spouse in the event that you die before your planned retirement age of 65. Also, let’s say you have a child that is currently 15 and you plan to pay for your child’s college education in the future. Although you already have a 30 year policy, you can purchase a 10 year policy to meet this specific need for your child’s education. So remember that although you may already have life insurance, it is beneficial to review your coverages because your needs may change through the years.
8) You can compare level term life insurance rates easily!
With the availability of the internet, comparing quotes can be done quickly. It is beneficial to compare rates because the same amount of coverage can be different in price by as much as 50% from one company to another. The Cheapest quote is not always best. The cheapest term policies often have stringent underwriting standards. Many companies advertise the lowest rates; however the caveat is that it is difficult to qualify for such rates. For a quick comparison of term life insurance quotes go to SecureTermInsurance.com
9) You cannot buy life insurance without going through an agent or a broker.
Buying insurance through a broker and buying insurance through an agent are the same cost. It is important to note that when you purchase insurance it is mandated by law that a licensed agent or a broker be involved in the transaction. There is no such thing as buying insurance directly from an insurance company so as to avoid paying a commission to an agent or a broker. Commissions are already built-in to the costs of all insurance policies. So choosing to purchase insurance through an agent or through a broker will not change the cost you pay for any policy. Keep in mind that if you are being charged a fee to get quotes then there is something wrong.
10) Insurance Agent vs Insurance Broker
Insurance agent is often used as an umbrella term to describe a person who sells insurance. Technically, being an agent implies that the salesperson only sells insurance with one company. Agents cannot offer price comparisons from different insurance companies. Insurance Brokers are not captive to any one company. They can shop the entire marketplace to find the best product at the best price.