Low Cost Term Life Insurance

Frequently Ask Questions?

What is term life insurance?
Term is the lowest cost life insurance product available. When you buy term life, you are purchasing "pure" insurance which typically does not include a cash value or a savings feature. Term Life insurance, as the name implies, is purchased for a particular "term" or length of time. Once that term period has arrived, and you do not convert your term policy to a "permanent" type, your life insurance policy will expire. If the insured dies within the "term period," the predetermined death benefit will be paid to the beneficiaries.

When should I buy?
Your need for life insurance changes with the stages of your life, starting with no need when you're young, progressing to greater and greater need as you take on more and more responsibility, and finally beginning to diminish as you grow older.

When you're single. An argument could be made that you should buy a policy now while you're young and rates are low. And if someone, a parent, say, depends on you for financial support, then by all means consider life insurance.

Married with children. A one-income family with young children is the classic high-need situation. Basically, all of these people are dependent on one breadwinner for their total support, so insurance on that life is vital. And if the non earning spouse should die, the other would have to pay for child care - a very expensive proposition that argues for insurance on both lives. This same high-need situation exists for dual-income households with children, for single parents, and for anyone caring for elderly parents who have limited resources of their own.

Married couples with no children. Each of you should probably buy a modest amount of life insurance to protect the other. The death of either of spouse would not be financially catastrophic; the other could presumably survive on his or her own income. Still, it could be a strain. Perhaps the survivor couldn't afford the mortgage or rent payments on a single income, or maybe you have big credit card debts. Also, there would be funeral costs.

What can term life insurance do for me?
Term insurance is bought by millions of people for a number of reasons. Families use Term for security. In case the insured passes away, your Term policy insures there will be money to use to pay for your home, college, outstanding loans and other major expenses. Small Business Owners use Term insurance as low cost debt protection to cover notes, lease obligations, business real estate mortgages and other expenses. Business Partnerships often use Term Insurance to buy out partners in the event of their death. For example, the deceased's beneficiary gets the insurance proceeds and the ownership in the company is then transferred to the remaining partner(s). Corporations use Term as stock purchase redemption's. In this case, the corporation gets the insurance proceeds and buys back the stock from the deceased's beneficiary, normally the surviving spouse or estate. For businesses, Term Insurance can provide real benefits for the beneficiaries with no negative cash flow impact on the company.

How much insurance do I need?
The answer to this question varies according to the reason(s) why the insurance is needed. If the need is financial protection for your family, rough "rules of thumb" suggest an amount of life insurance equal to 5 to 7 times your income. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include income sources (and amounts) other than salary/earnings, whether or not the individual is married and, if so, what is the spouse's earning capacity, the number of individuals who are financially dependent on the insured, the amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan, whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.

Do I need term life insurance although I'm over 65?
The kids have grown and are making it on their own. You clearly don't need as much life insurance as you once did. But, you may still need one for funeral costs. If you have a pension or considerable assets, it can be used to generate a good income after you die. In circumstances like this, the one caveat here is estate planning. If your estate is large enough to create an estate-tax bill when you die (that is, if it's above $650,000 now, a ceiling that will rise to $1 million in 2006), your heirs can use the death benefit to pay the IRS. If the policy is held by a trust, the benefit would not be counted as part of your estate. If you fall into this category, consider a whole-life policy. Since you don't know when you will die, you'll need to hold on to your coverage indefinitely.

What riders are available?
Riders are options available with some policies.
These may include: (Subject to State Approval)

Waiver of Premium Rider (WPR) If you become totally disabled prior to age 60, the premiums are waived.

Accidental Death Benefit Rider (ADB) If the insured dies from accidental death prior to age 70.

Dependent Child Rider (DCR) You may add your children to the policy. The premium is the same no matter how many children are covered.

Accelerated Benefit Rider (ABR) This allows a one-time lump sum payment of up to 25% of the base policy benefit, with maximums typically of $25,000 for terminal illness with less than six months to live, major organ transplant (heart, lung, liver, pancreas) or nursing home confinement for the remainder of life.

What are the different type of life insurance?
Term Insurance is straight forward and often the least expensive type of coverage. You can buy it one year at a time or for a specified number of years, hence the name Term. Most term policies are renewable at the end of the term although premiums will likely be higher. If you die during the term, your beneficiaries are paid the amount of the policy. If you are alive when the term ends there is no pay out.

Whole Life Insurance combines a death benefit with a savings plan. Part of the premium you pay goes towards building a cash value. Premiums are fixed and the policy will remain in force for your entire lifetime provided premiums are paid. When you die, your beneficiaries are paid the amount of the policy. There are a variety of Whole Life policies to fit your individual needs.

Universal Life Insurance is a variation of Whole Life insurance. It offers flexibility in the amount of coverage, rate of savings accumulation and the payments of premiums. You can decrease or stop premium payments temporarily as long as there is a cash value to cover the premiums as they become due. Once you resume paying premiums, you can increase those payments to build back your cash value.

Can't I wait to purchase life insurance?
You could delay purchasing life insurance. You may feel you can't afford it right now. But in reality you can't afford to be without insurance. Consider this, if your family is having a difficult time managing on your salary now, think about the difficult time your family will face without your salary. Not having life insurance is a huge gamble with potentially devastating consequences. Life insurance can guarantee the security of your family's financial future.

Can I borrow against my insurance policy?
It depends on the type of policy you have. You can't borrow against a term policy. Borrowing is permitted on the cash value portion of Whole Life and Universal Life policies. Loan rates are usually below prevailing market rates. You may or may not be required to repay the loan, however any unpaid portion of a loan will be deducted from the policy's death benefit. Therefore, loan repayment is always encouraged in order to restore your policy's original value.

Should I consider replacing my current policy?
You should always be careful when you consider switching life insurance companies, especially if your health has changed (for the worse) since you took out your policy. However, if your health is still good, with the recent rash of new policies and much lower prices, you should definitely consider a new policy. You see, your current company is not likely to offer to reduce the premium on your current policy. In fact, they are counting on profits from older policies to allow them to decrease rates (and attract customers) on new policies. If your health is substantially the same, by all means take this opportunity to shop around.

One note of caution. Under no circumstances should you ever cancel an existing policy before you have its replacement policy issued and in your hands! There are many circumstances that could result in higher premiums or a loss of benefits if you aren't careful. We recommend using an independent agent you trust. Independent agents (like our agency) have a variety of companies to choose from. As a result, they can focus on your needs, then find a product that best meets those needs. The danger in using a "Captive", or one-company agent is that there is a tendency to take that company's product and try to convince you that it meets your needs, in essence putting product before customer needs.

Can an insurance company refuse to insure me if I have a pre-existing condition?
Yes, a company can reject you for a pre-existing condition with almost no exceptions. A pre-existing condition is a medical condition that the insured knows about before applying for coverage. Such a condition might affect either insurability or premium amount.

What can I do if an insurance company rejects my life insurance application?
Each company has its own underwriting standards. Underwriters are the people who decide which applicants for insurance are accepted and which are rejected, and also what extent of coverage their insurance company will provide and at what price. If one company refuses to insure you, shop around for other companies. Remember, companies do not need to provide life insurance to you.