There are countless term insurance life insurance companies. As someone who’s been a life insurance professional for more than 20 years, I can honestly say that the best term life insurance companies, the top rated term life insurance companies, and the best rated term life insurance companies are very similar. It’s not to say they are all exactly alike but they are usually similar. To compare term life insurance companies is really a matter of what’s important to prospective insurance client.

Your priority

My experience has been that what most people are concerned with when it comes to term insurance is what it will cost them.

Clearly some term life insurance companies are more highly rated by companies such as A.M. Best, Moody’s, and Standard & Poor.

Some of the factors that determine a company’s rating are:

• Financial strength
• Financial stability
• Ability to pay claims
• Claims paying expediency

If any of these factors, among the others that are used, are important to you when you compare term life insurance companies, how important are these factors to you in comparison to price?

What if one company is considered one of the best term life insurance companies in the industry but the premium cost is double that for the same amount of coverage by one that is not considered one of the best rated term life insurance companies?

What’s your priority?

Ratings

Similar to being in school, term life insurance companies and all insurance companies are rated on an A-F basis.

Seems easy to understand, right?

Did you know that and “A” rated company can be rated anywhere from A++ to A-?

Did you know that different ratings companies, including those mentioned above use different criteria to determine ratings?

Did you know that an insurance company can be rated differently by the different ratings companies?

If an insurer receives a favorable rating from one rating company and a less favorable one from another rating company, which one do you think they’re going to make sure you’re aware of?

Underwriting

Insurance companies use the term underwriting to determine who pays how much for what. Different companies have different underwriting guidelines. Its name literally means that someone in the company places a signature on the policy saying a particular person meets the company’s underwriting guidelines.

There are three main methods used for underwriting life insurance policies:

• Fully underwritten-most common-may involve medical exam (blood/urine specimen/attending physician statement).
• Simplified issue-less common-no medical exam-decision regarding issue usually swift
• Guaranteed issue-anyone who applies and meets certain conditions is guaranteed that a policy will be issued-(includes accidental death insurance and graded death benefit policies)

There are also different underwriting classifications. The most common:

• Preferred-best rates
• Standard-most common
• Sub-standard, also known as rated or table

Some companies subdivide the classifications. For example:

• Super preferred
• Ultra preferred
• Standard plus

Table can be in the form of a number (usually 1-6) or a letter (usually A-G) – the higher the number or letter, the higher the premium.

Convertibility

Some companies allow for conversion of a term policy to a permanent policy at a later date without proving insurability.

Other companies allow for conversion but require proof of insurability.

Some companies do not offer convertibility at all.

If convertibility is offered, it is often within certain time limits.

If you’re sure you want term and nothing else, then this is not something you need to consider.

Price

The main factors that affect price:

1. Health

2. Age

3. Life style

They are numbered as such because that is generally the order of priority companies use to classify prospective clients.

Poor health can and will exclude someone regardless of age and lifestyle and no amount of money will buy insurance. On the other hand excellent health can go a long way in reducing premiums.

A person’s age is the next factor. The age is compared to mortality rates. Different companies have different charts for mortality rates.

Another way to describe mortality rate is how many years someone of their age is away from death.

Statistically speaking, insurance companies know pretty accurately how many people of a certain age will die before their next birthday.

Life style is the third factor. The most common consideration is whether someone smokes but there are others as well, such as what someone does for a living. Certain professions are more hazardous than others.

A person’s hobbies have an effect as well. Sky diving, and speed racing are often frowned upon, and may not result in denial of coverage, but could result in higher premiums.

Regardless of all factors, female rates are nearly always lower than male rates.

Fully underwritten vs. simplified issue vs. guaranteed issue

All things being equal, fully underwritten is going to result in the best priced premium. However, often times all things are not equal.

Are you sure your health is as good as you think it is or is it possible a blood/urine sample, saliva swab, or doctor’s report could reveal something you’re not aware of, or if you’re not the most ethical person, perhaps something you simply don’t want to reveal?

A fully underwritten policy takes much more into consideration when determining rating class and price than a simplified issue policy.

Depending on your point of view, that can be an advantage or a disadvantage.

Assuming you’re being honest and there’s not already information reported about you to the medical information bureau (MIB), your chances of a policy being issued as applied for are as high as 9 out of 10 if you apply for a simplified issue policy.

On the other hand, there is about a 60% chance you will not qualify for a fully underwritten policy as applied for.

A guaranteed issue policy will definitely be issued. You will know if you qualify before actually signing the application. It’s either yes or no. However because it’s guaranteed, the price is usually much higher, unless it is a conditional policy such as an accidental death policy.

Conclusion

Unless you know the ropes and/or can take the time to weigh all the factors when comparing term life insurance companies, an experienced professional can steer you the best term life insurance companies for you to consider.

Having said that, if you want to be absolutely sure that you’ll get the insurance you want, it’s best to buy a guaranteed issue policy.

If you’re pretty sure you’re in good health but don’t want to go to the trouble of a medical exam or paramedical exam (blood/urine), or you don’t want to reveal certain matters that could affect your ability to obtain insurance, you should consider a simplified issue policy.

Once you qualify for a policy, assuming no fraud is involved, the only one who can cancel the policy once it’s been issued is you. The insurance company cannot cancel you as long as the premiums are paid.

Perhaps it makes sense to apply for a guaranteed or simplified issue policy first. Once issued then shop for the best price and/or the best rated term life insurance companies.

What’s best for you?

I invite any and all questions and comments.

Please see below on why you should consider owning an independent life insurance policy (or term life) vs mortgage insurance (creditor insurance) sold from the bank:

1. Post-Underwriting – Bank insurance is post underwritten. Companies investigate the eligibility AFTER a claim has been made; ie you may be paying premiums for years and in the event of a tragedy your loved ones may discover you never qualified for the insurance in the first place.

2. Cost – Often, mortgage life insurance with less features and flexibility actually costs MORE than an independently owned insurance policy.

3. Portability – If you buy the coverage from your lender, it may disappear if you refinance, however in the case of a new lender it will require a new policy based on attained age at that time. Just as you want to avoid depending on your employer’s life insurance coverage, in case you change jobs, you should also make sure your insurance isn’t going to vanish just because you found a better mortgage.

4. Named beneficiary – The proceeds if something were to happen will bypass your loved ones. Mortgage insurance plans purchased through the bank automatically pay off your loan no matter what situation your family faces at your death. An individual life insurance policy lets you name your spouse or children as beneficiaries, giving them flexibility to pay off the mortgage when they feel the time is right.

5. Declining benefit – As mentioned above the banks creditor policy is a declining benefit ie the benefits may vanish before your eyes. Mortgage insurance benefits gradually decline in an attempt to match the declining balance of your debt (declining benefit). Those plans are like a runaway train, you may move into a bigger house with a bigger mortgage, but the death benefit keeps shrinking anyway. Buying an individual life insurance policy keeps you in the driver’s seat, letting you lower the benefits as you see fit or keeping a level benefit for life.

6. Convertibility – An individually owned term insurance policy in most cases will allow the policy to be converted without medical to a permanent (life long) solution. A creditor insurance policy owned through the bank does not provide this benefit, which is especially important if one gets sick and can no longer qualify for coverage.

7. Preferred underwriting – an independently pre-underwriten policy allows the insurer to determine if you qualify for “preferred” rates which will lower premiums even further

8. Consolidation of benefits – by combining your mortgage insurance, with other insurance needs such as income replacement, child care, education etc you will benefit from fees saved on multiple policies and tiered discounts (typically insurance companies discount in 250K bands of insurance), along with simplicity of understanding how much coverage you have in one place. With a bank you can only insure your mortgage.

9. Discussed with a licensed insurance professional – Most bank staff selling creditor mortgage insurance are unqualified and unlicensed in life insurance. Licensed professionals shop the market

10. Shop the market – buying an independent life insurance policy from a licensed broker allows the market to be shopped to find the best possible solution from a wide range of insurers. Banks often work with only 1 insurance company to provide a singular solution. Furthermore, licensed professional have a responsbility to sell based on a Needs Based approach and can accurately assess your needs.

Lastly, while looking at life insurance, make sure to consider disability and critical illness insurance in case you become unable to pay your mortgage due to serious illness or injury.

Please contact your local independent life insurance expert to evaluate your options.

One of the most important things you can do as parents is to ensure the financial welfare of your children in the event of your death. Life insurance is the best way to be rest assured that your children will be taken care of if you die. Although we never like to think of that kind of thing happening, but it does.

What is Life Insurance

Life insurance is a policy that you can enter with your insurance company, which promises a certain amount to your beneficiary(ies) in the event of your death. Usually, a spouse will name the other spouse as well as their children as beneficiaries of the policy. As part of the agreement with life insurance, your insurance policy will be a monetary value, that you will in return, pay a monthly premium for. Premiums usually depend on your age, gender, occupation, medical history and other factors.

There are other types of life insurance that may provide benefits for you and for your family while you are still living. These policies can accrue a cash value on a tax-deferred basis and can be used for future needs such as retirement or your child’s education.

Do I Need Life Insurance

Earning an income allows you and your family to do many things. It pays for your mortgage, buys cars, food, clothing, vacations and many other luxuries that you and your family enjoy. However, certain situations can cause you to lose your income, and those who depend on you also depend on your income. If any of the following statements about you and your family are true, then it is probably a good idea for you to consider life insurance.

1) You are married and have a spouse.

2) You have children who are dependent on you.

3) You have a parent or relative who is aging, or disable and depends on you.

4) You have a loved one in your life that you wish to provide for.

5) Your 401K retirement plan, pension and savings aren’t enough to insure your loved one’s future.

What Are My Life Insurance Options

There are four basic types of life insurance that can meet you and your family’s needs:

Term Life Insurance

This is the least expensive type of life insurance coverage, and at least at the beginning, the simplest. Term life insurance policies do not accrue cash value, and are fixed over an extended period of time – usually one to 0 years, and they can be renewed. This life insurance policy pays the beneficiary of your policy a fixed amount in the even that you die in the period of time that your policy includes. The premiums of term life insurance are lowest when you are young and increase as you get older

Whole Life Insurance

This type of life insurance is similar to term life insurance, as well as provides cash value. Over time, whole life insurance generally builds up a cash value on a tax-deferred basis, and some even pay it’s policy holders a dividend. This type of life insurance is popular, doe to the cash value that is accessible to you or your beneficiaries before you die. Used to supplement retirement funds, or to pay for your child’s education, whole life insurance should be used for protection, rather than for accumulation.

Universal Life Insurance

This type of life insurance is a flexible kind of plan. These policies accrue interest and allow the owner to adjust the death benefits and premiums to their current life situation. You decide the amount of premium for universal life insurance, and of you skip a payment, this will be deducted from your death benefit. Universal life insurance stays in effect as long as your cash value can cover the costs of the policy. These rates are subject to change, but they can never fall below the minimum rate that is guaranteed when you sign up for universal life insurance.

Variable Life Insurance

This type of life insurance is designed for people who want to tie the performance of their life insurance policy to that of the financial market. The policy holder gets to decide how the money should be invested, and your cash value has the opportunity to grow more rapidly. However, if the market is poor, your life insurance policy’s death benefit will be poor. As with whole life insurance and universal life insurance, you may withdraw against the cash value. Be reminded that withdrawals of this life insurance policy will be deducted from the cash value.

How Can I Save Money With Life Insurance

Below you will find some suggestions on ways to save money while purchasing the life insurance policy that is right for you.

1) If you don’t need life insurance, don’t buy it. Don’t buy more insurance that you actually need in order to provide financial security for your family.

2) Shop around for competitively-priced life insurance policies while you are healthy. Don’t smoke, or do anything that might increase your rates. Take care of yourself by exercising regularly and maintaining a moderate and healthy weight.

3) If you purchase a term life insurance policy, look for guaranteed and renewable policies. That way you won’t have to periodically continue to shop around for those life insurance policies.

4) You should only buy optional forms of coverage such as riders only if necessary.

5) Shop around and compare life insurance policy rates and coverage. There are thousands of life insurance companies to choose from. It is advised that you get at least three separate quotations of life insurance, and then decide which is the best for you.

An all-too-common occurrence for life insurance policy holders is one in which someone purchased a life insurance policy several years ago, they have been paying premiums faithfully, and they unexpectedly receive a Lapse Notice. The Notice states, “… your premium is not enough to cover the policy expenses, please submit (a lot more) money to keep your valuable coverage.”

You’ll probably look to the insurer or agent for help. Here are some things you should consider to maintain your valuable coverage.

Often the policy owner thinks of life insurance the same way they think of auto insurance. They receive a premium notice, they pay the premium amount stated on the notice, and they believe they have met their requirement to secure the coverage. What they don’t realize is that with life insurance plans, such as universal life, indexed life, whole life and variable life, the premium is not the same as the cost.

Premium is what you pay to the insurance company. The policy fees are the cost of the coverage.

With these policies as the insured gets older the life insurance policy costs more. This is where the trouble usually happens. At some point in time, and often unbeknownst to the policy owner, the policy expenses exceed the premium being paid. This triggers a feature in the policy which allows the insurer to take money from the policy’s cash value, without having to notify the policy owner, to make-up any shortage of policy expenses. As this event occurs every month, the life insurance policy will be depleted of its cash value and move towards a lapse.

Before a life insurance policy lapse, the insurer is obligated to mail a lapse notice which allows the policy owner 31 days to pay enough premium to cover one month’s worth of expenses. The problem however, is that the expenses will typically have greatly exceeded the amount of premium the owner had been paying.

It’s common for the new premium to be three or four, or even more, times as much as they had been paying. This can put the cost of coverage out of their financial reach. The increase in premiums may not be justified, and a life insurance expert should evaluate the policy to determine if you’re being over-charged.

One thing you can do to make sure you aren’t caught off guard by increasing policy fees, and lose your valuable coverage, is to review your policy with an agent every year. In this meeting you should bring a recent Annual Statement for the policy and the agent should bring in-force illustrations. These are the tools that will best inform you of the policy’s expenses and where your premium amounts should be set for the year.

If you’ve received a lapse notice for your life insurance policy, here are a few things you can do:

1. Lower the death benefit to an affordable amount. The lower the death benefit the lower the premium will be.

2. Ask the insurer for the cost to keep the policy in-force to an age less than maturity. In other words, a universal life insurance policy, as one example, will stay in-force until the insured’s age 100. Fees are set based on this age assumption — 100. If you tell the insurer you only want the policy to stay in-force to age 86 (for example), the premium required will be less.

3. Ask the insurer if they offer a less expensive insurance product that you can exchange your policy for.

4. Get the assistance of a qualified agent to help you understand and make decisions about your policy.

5. Have a life insurance analyst review the policy, past payments and future payments to determine if you’re being over-charged for the coverage.

Six Basic Kinds of Life Insurance

Regardless of how fancy the policy title or sales presentation might appear, all life insurance policies contain benefits derived from one or more of the three basic kinds shown below. Some policies due combine more than one kind of life insurance and can be confusing.

Term Life Insurance

Endowment Life Insurance

Whole Life Insurance

Variable Life Insurance

Universal Life Insurance

Variable Universal Life Insurance

Term Life Insurance

Term life insurance is death protection for a term of one or more years. Some companies are offering policies with terms up to thirty years. Premiums on term insurance remain level during the life of the policy. Term Life Insurance has no cash value account. Death benefits will be paid only if you die within that term of years. Term insurance generally provides the largest immediate death protection for your premium dollar.

Some term life insurance policies are renewable for one or more additional terms even if your health has changed. Each time you renew the policy for a new term, premiums will be higher. You should check the premiums at older ages and the length of time the policy can be continued.

Some term insurance policies are also convertible. This means that before the end of the conversion period, you may trade the term policy for a whole life or endowment insurance policy even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Life Insurance “Endowment”

An endowment insurance policy pays a sum or income to you, the policyholder, if you live to a certain age. If you were to die before then, the death benefit would be paid to your beneficiary. Premiums and cash values for endowment insurance are higher than for the same amount of whole life insurance. Thus endowment insurance gives you the least amount of death protection for your premium dollar.

Whole Life Insurance

Whole life insurance gives death protection for as long as you live. The most common type is called straight life or ordinary life insurance, for which you pay the same premiums for as long as you live. These premiums can be several times higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term insurance policy until your later years.

Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher than for ordinary life insurance since the premium payments are squeezed into a shorter period.

Although you pay higher premiums, to begin with, for whole life insurance than for term insurance, whole life insurance policies develop cash values which you may have if you stop paying premiums. You can generally either take the cash, or use it to buy some continuing insurance protection. Technically speaking, these values are called nonforfeiture benefits. This refers to benefits you do not lose or forfeit when you stop paying premiums. The amount of these benefits depends on the kind of policy you have, its size, and how long you have owned it.

A policy with cash values may also be used as collateral for a loan. If you borrow from the life insurance company, the rate of interest is shown in your policy. Any money which you owe on a policy loan would be deducted from the benefits if you were to die, or from the cash value if you were to stop paying premiums.

Variable Life Insurance

Variable life insurance, provides permanent protection for you and death benefits to your beneficiary upon your death. The value of the death benefits may fluctuate up or down depending on the performance of the investment portion of the policy. Most variable life insurance policies guarantee that the death benefit will not fall below a specified minimum, however, a minimum cash value is seldom guaranteed. Variable is a form of whole life insurance and because of investment risks it is also considered a securities contract and is regulated as securities under the Federal Securities Laws and must be sold with a prospectus.

Universal Life Insurance

Universal Life insurance is a variation of Whole Life. The insurance part of the policy is separated from the investment portion of the policy. The investment portion is invested in bonds and mortgages, the investment portion of Universal Life is invested in money market funds. The cash value portion of the policy is set up as an accumulation fund. Investment income is credited to the accumulation fund. The death benefit portion is paid for out of the accumulation fund. Unlike Whole Life Insurance, the cash value of Universal Life Insurance grows at a variable rate. Normally, there is a guaranteed minimum interest rate applied to the policy. No matter how badly the investments go by the insurance company, you are guaranteed a certain minimal return on the cash portion. If the insurance company does well with its investments, the interest return on the cash portion will increase.

Variable-Universal Life

Variable universal life insurance pays your beneficiary a death benefit. The amount of the benefit is dependent on the success of your investments. If the investments fail, there is a guaranteed minimum death benefit paid to your beneficiary upon your death. Variable universal gives you more control of the cash value account portion of your policy than any other insurance type. A form of whole life insurance, it has elements of both life insurance and a securities contract. Because the policy owner assumes investment risks, variable universal products are regulated as securities under the Federal Securities Laws and must be sold with a prospectus.

Rates and coverage vary form state to state. Shop around on your own and talk to an independent insurance agent to make sure you get a plan that’s right for you. It’s amazing how much rates may vary from company to company for the same coverage.

There are those who wonder about life insurance-does it work? Similarly, others question if whole life insurance worth it. Others ponder about universal life insurance-does it work? Still others ask about term life insurance-does it work?

I will answer all the questions with more questions: What do you mean does it work or is it worth it? Shouldn’t the real question be do they work for you, if so how, and if not, why not?

Shall we have a look?

Life insurance-does it work?

Let’s start with the basics:

• All life insurance offers a tax-free death benefit
• The owner of a life insurance policy decides who gets the death benefit
• The person or entity that receives the death benefit is called a beneficiary
• The main purpose of a death benefit is to protect the beneficiary from financial hardship
• It is not death insurance
• Cost is based primarily on a person’s health and age in that order
• Not everyone qualifies
• There will only be one claim per policy per person-we are all going to die someday
• There are two main types: Temporary and permanent

Is there anyone in your life who would suffer a financial loss when you die? Does it make sense that when you die there will be enough money to pay your final expenses, such as burial, medical bills, and debts? Does it make sense that when you die, especially if it’s unexpected and untimely that your family, loved ones, and/or business have enough money to carry on?

If you answer yes to any of the above questions, life insurance probably works for you.

Is whole life insurance worth it?

Again I will answer with questions.

Do you want:

• To be insured the rest of your life?
• Your insurance premiums (what you pay) to be fixed and never increase?
• To be able to enjoy living benefits (cash value) as well as the death benefit?
• The amount of the cash value to be guaranteed and know exactly what it’s worth?
• To be able to sell the policy back to the company for its cash value?
• To be able to have access to the cash value any time you want or need it?

If you answered yes to any of the above questions, whole life may be a good fit for you.

Are there ways to earn better return on your money? There absolutely is.

What concerns you more, the return OF your money or the return ON your money?

How important is permanent protection to you?

How important is the word guarantee to you?

Universal life insurance-does it work?

More questions for you to ask yourself:

• Are you willing to take some risk that the cash value may not perform as planned?
• Do you want the flexibility of being able to manipulate the amount of your premiums?
• Are you OK with the fact there are more moving parts in UL than whole life (WL)?
• Do you want permanent insurance that you can purchase at a lower initial premium than WL?

If you answered yes to ALL the above questions and you want to be insured for the rest of your life, you may want to consider UL as an alternative to WL.

There are several kinds of UL. As long as you understand how it works, it can be a great tool to assist in long-term financial planning.

Both WL and UL can be very effective tools to supplement retirement planning, college planning, or as a supplemental employee benefit.

Term life insurance-does it work?

You guessed it. More questions:

• Did you know the word term is similar to the word lease?
• Did you know term insurance is the equivalent to renting your insurance?
• Do you want to be insured temporarily for a specified period of time?
• Are you willing to pay the higher premiums (sometimes exponentially higher) when the term expires?
• Do you want only a death benefit?
• Are you OK with knowing you will probably outlive your term?
• Did you know that less than 5% of all term policies never pay a death benefit because of the above?
• Is immediate cost of insurance your main concern?

If the answer to all the above questions is yes, a term policy may be what is best for you.

Similar to a lease-with-option to buy, some (not all) insurance companies offer the ability to convert from a term policy to a permanent (WL or UL) policy at a later date.

Last but not least

Did you know you can own more than one policy? Perhaps all the different kinds mentioned could work for you.

How much insurance do you need? To be adequately and fully insured, a guideline is to be insured for 10-15 times your annual income.

What will your budget allow? Start with that then decide how much of a death benefit you need, then decide if it’s whole life insurance, universal life insurance, or term life insurance that is best for your situation. Don’t forget. You don’t have to pick just one.

How often should you review your situation? It’s probably best to review at least once a year.

Are you and your family, loved ones, or business protected against financial hardship regardless of if you die too soon or live too long?

Do you have a guarantee you’ll still be here tomorrow?

If not, what are you waiting for?

How can I help?

Leave comments or questions below.

Let’s be honest. The topic of life insurance isn’t exciting or glamorous, but it is important. In fact, many experts consider life insurance to be the cornerstone of good financial planning.

But how do you know if you need life insurance? How much is enough? What kind of life insurance policy is best for you?

Answering these basic questions about life insurance will help to simplify the shopping process and ultimately allow you to select the best policy to secure your family’s future for years to come.

Establishing Your Needs

To clear up any misconceptions, life insurance is designed to protect your loved ones from financial loss in the event of your death. Knowing this, it’s important to establish whether you need life insurance and how much you should purchase.

According to MetLife you generally need life insurance if:

• You have a spouse
• You have dependent children
• Relatives or elderly parents depend on your income
• Your retirement funds are not enough to provide for your spouse’s future
• You own a business
• You have a large estate

The beneficiaries of your life insurance policy can use the proceeds from your life insurance to:

• Pay for last expenses and funeral costs
• Cover estate taxes (if applicable)
• Pay off existing debts (mortgage, car loan, credit card debt)
• Pay for everyday expenses (food, clothing, childcare)
• Put towards your spouse’s retirement fund
• Donate to charity

If you don’t have dependents, you may still wish to purchase a life insurance policy to avoid becoming a financial burden to your loved ones in the untimely event of your death. Young singles also benefit from purchasing life insurance while they’re young and healthy, allowing them to secure a low premium for years to come.

Choosing a Dollar Amount

Figuring out how much life insurance your loved ones would need to maintain their quality of living can be tough. Generally speaking, experts recommend purchasing between 5 and 10 times your annual salary. But, as MetLife points out, your exact need for life insurance will depend on your personal and financial circumstances.

You can get a ballpark estimate of your life insurance needs by first totaling the funds your family would need for the abovementioned items (funeral costs, daily living, etc.). You can find helpful worksheets online that will help you organize and come up with this list of expenses.

After you’ve totaled your expenses, take stock of the funds you have in cash, savings, retirement accounts, bonds, property, pension and Social Security. Subtracting your financial resources from your expenses will give you a rough idea of how much life insurance you should purchase.

When it comes to choosing how much life insurance to purchase, it’s a good idea to get an idea of your needs before buying a policy–but your licensed life insurance professional will undoubtedly help you choose a dollar amount that accurately reflects the needs of your beneficiaries.

Selecting a Policy

Generally speaking, there are two types of life insurance: term life insurance and permanent life insurance. The type of policy you select will depend largely on your life insurance needs and what resources you have to pay life insurance premiums.

Term Life Insurance

Term life insurance, as the name suggests, will cover you for a specified amount of time, which means the insurer will only pay out a death benefit if you die during the term of your policy.

According to the Insurance Information Institute (I.I.I.), most people purchase a 20-year term policy, although smaller terms are available. Of course, you can renew your term life policy after it expires, although your premiums may increase as you age. But all in all, because of the “temporary” nature of term life insurance, policies are generally much cheaper and are therefore an attractive option for young people and families with a limited income.

Permanent Life Insurance

On the other hand, permanent life insurance, as you might have guessed, is permanent. A permanent life policy will pay out a death benefit whether you die tomorrow or in 60 years.

Permanent life insurance is also an appealing option for many because of the added benefit of the policy growing on a tax-deferred basis, which can grow to be fairly large over time. As a policyholder, you may be able to borrow against this cash value while alive, which has been of great help to some. Of course, most loans need to be paid back otherwise they will be subtracted from the death benefit, and your beneficiaries may have to liquidate assets to pay back the loan.

Nonetheless, permanent life insurance offers a wide variety of saving and investment options. Because of this, policies are generally more expensive than term policies, which may be hard for young adults to handle.

Your life insurance professional will help you decide which type of policy is best for your life insurance needs–and your budget. But researching these policy types beforehand can help you narrow down which policies appeal to you.

Knowledge is Power

No, learning about life insurance and planning for the unexpected isn’t glamorous, but it is important. So take advantage of consumer resources and talk to a life insurance professional about purchasing affordable life insurance. You’ll rest easier at night knowing your loved ones are taken care of for years to come!

While many of us understand the basic functions of our life insurance policies, it’s not uncommon for questions to arise long after you purchased the policy.

To help address your policy problems, we’ll answer four of the most common life insurance questions to help you gain understanding and control of your life insurance policy.

Questions Answered

How do I file a life insurance claim?

To begin the claim process, you’ll need to obtain a couple copies of the policyholder’s death certificate. If you have trouble obtaining copies of the death certificate from the hospital or coroner’s office, your funeral director should be able to get you a copy.

Next, you’ll need to contact your life insurance agent. Your agent will help you complete the necessary paperwork to file the claim. If you’re not sure who the insured’s agent was, you can contact the insurance company directly and someone will help you file the claim. Remember to bring a copy of the death certificate for your agent as it will be needed to ensure quick claim submittal.

How will I receive the death benefit?

Once the life insurance claim is submitted, you’ll need to choose how the life insurance proceeds will be allocated.

According to the Insurance Information Institute (I.I.I.), there are generally four ways to distribute the death benefit:

Lump Sum. You receive the entire death benefit in one payment.

Specific interest provision. The insurance company pays you both principle and interest on a prearranged schedule.

Life income. You receive a guaranteed income for life. However, the amount you receive depends on the benefit amount, your gender and age at the insured’s time of death.

Interest income. The life insurance company holds the proceeds but pays you interest on the policy. Thus, the death benefit remains in tact and goes to a second beneficiary after you die.

No matter which option you choose, you should receive the proceeds from the policy within days of filing the claim. Life insurance companies are required by law to pay claims in this fashion. To learn about the guidelines under which your insurer must pay a claim, contact your state’s division of insurance.

What should I do if I can’t find the policy?

Unfortunately, there’s no database for purchased life insurance policies. That’s why it’s very important to know where the insured’s life insurance policy is at all times. Nonetheless, there are some things you can try to locate a lost policy.

You can start by trying to determine:

• Which company might have issued the policy
• Which agent may have issued the policy
• Whether the policyholder had life insurance through an employer, union or other group

The I.I.I. recommends trying to locate that information by:

Searching records, storage areas and safe deposit boxes. There you may find insurance-related documents, old checks, premium payment receipts or policy notices.

Contacting the policyholder’s legal and financial consultants. Previous and current consultants may have some information regarding the deceased’s life insurance.

Contacting the insured’s employer(s). Previous and/or current employers will be able to tell you if the policyholder had a group life insurance policy.

Checking tax returns. By checking past tax returns, you may find interest income from or paid to a life insurance company.

Checking the mail. Even if the policy was paid up, the insurance company will send an annual premium or dividend notice in regard to the policy.

Checking north of the border. If there’s a possibility that the policy was purchased in Canada, you can contact the Canadian Life and Health Insurance Association at (800) 268-8009, or visit them on the Web.

Probing the MIB database. While there’s no database for life insurance policyholders, there is a database for life insurance applicants. For $75, you can search the MIB database, and while it rarely pays off (MIB finds about one in five policies), it might be worth a shot.

If these tips still don’t result in the location of a lost policy, contact your own agent, lawyer or financial consultant as they may have additional recommendations.

What if I can’t pay my life insurance premiums?

Financial hardship can fall on anyone. If this happens to you and you can’t pay your life insurance premium, you should know what to expect.

Generally speaking, if you have a term life insurance policy, not paying your premiums will result in a lapsed policy, which means that the policy will automatically be cancelled and you probably won’t see any proceeds from the policy.

If you have a permanent life insurance policy, the I.I.I. says you’ll have some of the following options:

Cash out the policy. When you cash out, you’ll stop paying the premium and collect any available cash value. However, if the sum of the cash value is more than what you’ve paid in premiums, that cash may be taxed.

Non-forfeiture. A “reduced paid-up” option might be available to you, allowing you to stop paying premiums completely for a reduced death benefit and no cash savings. You may also be able to convert a permanent policy into an extended term policy.

Lapsed policy. If you choose to let your policy lapse, you may be able to get it reinstated. Some insurance companies allow you to do this if you do so within five years of lapsing. Reinstatement, however, may be contingent on your ability to pass a medical exam and pay back the premiums owed plus interest.

If you fall on hard times, be sure to contact your life insurance agent right away to work out an arrangement. Depending on your circumstances, it’s generally better not to let a permanent policy completely lapse as you may forfeit the cheap life insurance you had when you bought the policy.

Don’t Let Your Questions Go Unanswered!

If you have questions about your life insurance policy, it’s always a good idea to discuss them with an insurance agent. They can give you new, up-to-date and state-specific information about your life insurance policy so you won’t have any surprises down the line!

Are you ever too old to get life insurance? Not necessarily, but contrary to insurance salespeople, not everyone is a candidate for life insurance. There is also a lot of confusion around the difference between types of insurance such as term life and whole life insurance. Our goal is to take the confusion out of all your life insurance needs.

Many people do not understand whether or not they actually require life insurance. Most people try and avoid thinking about it and justify it by claiming they won’t need any money when they are dead. That is indeed true, but the bigger question is, “Will your spouse and or dependants need money?” If they answer is yes, you may be shopping for life insurance. The next question is what kind?

You can choose from term life insurance, whole life insurance, universal or variable universal life insurance, no-load life insurance and let’s not forget mortgage life insurance. This is a great way to have your mortgage paid off immediately if you die. This will mean your family can live mortgage free for as long as they own the house. With all the different types of life insurance policies, it no wonder most people choose not to do anything. Our goal is to take the mystery out of these policies so that you can make an informed decision.

The Different Types of Life Insurance

o Term Life Insurance: Term insurance is the backbone of most life insurance policies. You pay a fixed premium over a specified period of time. If you happen to die during that timeframe, the insurance company pays you the pre-determined amount. The issue with term life insurance is that if you don’t die within that period, the coverage ceases to exist and you are left with nothing. Another issue with term life insurance is that your premium can go up after a period of time. You can often buy another insurance policy after the term expires, the rate however will often be much higher.

o Whole Life Insurance: Unlike term insurance, whole life insurance covers you for your entire life. Basically, you pay a premium each month for the rest of your life. If you choose, you may cash in the policy while you are still alive and receive a lump sum amount. Whole life insurance policies have a face value and a cash value. The face value is the amount that is paid at death or policy maturity, the cash value is the amount you receive is you surrender the policy before you die or it matures.

o Universal Life Insurance: This type of insurance again is very different than the two above. This type of insurance policy takes your premiums and invests them into bonds, mortgages and money market funds. Your investment fund pays for the cost of the death benefit that is set when you purchase this life insurance. If your investment fund does poorly, the insurance company is on the hook to pay out a minimum guaranteed amount. This type of life insurance policy is a bit more flexible than the others because you can change the premiums and death benefits to fit your current budget. This type of flexibility is often popular with younger couples or families where circumstances can change quickly.

o Variable Universal Life Insurance: This type of insurance policy will depend heavily on how well your investment opportunities have done over the years. The better the investments do, the greater the death benefit payoff for you.

o No-Load Life Insurance: Low-load or no-load life insurance often times has fewer expenses than a traditional life insurance policy. What this means for you is that more of your premium goes towards earning you more money rather than commissions and other expenses. Speak to your financial advisor as they will likely sells no-load or low-load life insurance policies for a flat fee versus a commission.

Once you have decided that you are going to buy life insurance, the next question you need to ask is,”How much?” We highly recommend that you speak with your financial advisor and accountant. They will be able to help you determine exactly the amount of cash your family will require to maintain their current standard of living if anything should ever happen to you. They will be able to help determine what kind of life insurance rate you can afford based on your current income and expenses.

We hope we have achieved our goal about informing you on the various types of insurance on the market. There are a number of excellent insurance brokers who can offer you a range of products. We hope you have given you some information so that you can ask the right questions for you and your family.

For many people, the first introduction to life insurance is when a friend or a “friend of a friend” gets an insurance license. For others, a close friend or relative died without having adequate coverage or any life insurance. For me, I was introduced to a life insurance company where I had to set appointments with friends and family as I learned the ends and outs of the industry and hopefully, make some sales.

Unfortunately, however, this is how most people acquire life insurance – they don’t buy it, it is sold to them. But is life insurance something that you truly need, or is it merely an inconvenience shoved under your nose by a salesperson? While it may seem like the latter is true, there are actually many reasons why you should purchase life insurance.

As we grow older, get married, start a family, or begin a business, we need to understand that life insurance is absolutely necessary. For example, picture a safety net. You may be the greatest tightrope walker in the world, without a doubt. You could perform without a net, but, “Why?” You cherish your life and the life of those close to you and you wouldn’t do anything that showed that you felt differently. Let’s face it, we have no control over the unpredictability of life or of unforeseen occurrences. With that in mind, just as a safety net protects the uncertainty life, so does life insurance. It is an indispensable and fundamental foundation to a sound financial plan. Over the years, life insurance has given many caring and responsible people the peace of mind knowing that money would be available to protect the ones most important in their life, family and estate in a number of ways, including:

1. To Pay Final Expenses

The cost of a funeral and burial can easily run into the tens of thousands of dollars, and I don’t want my wife, parents, or children to suffer financially in addition to emotionally at my death.

2. To Cover Children’s Expenses

Like most caring and responsible parents, it is necessary to be sure that our children are well taken care of and can afford a quality college education. For this reason, additional coverage is absolutely essential while children are still at home.

3. To Replace the Spouse’s Income

If one parent passes away while the children are young, the surviving caring parent would need to replace that income, which is essential to their lifestyle. The responsible surviving parent would need to hire help for domestic tasks like cleaning the house, laundry, and cooking. Add to that equation if it is a single parent, helping with schoolwork, and taking your children to doctor’s visits.

4. To Pay Off Debts

In addition to providing income to cover everyday living expenses, a family would need insurance to cover debts like the mortgage, so they wouldn’t have to sell the house to stay afloat.

5. To Buy a Business Partner’s Shares

In a business partnership, the partners need insurance on each other partner’s life. The reason is so if one dies, the others will have enough cash to buy his interest from his heirs and pay his share of the company’s obligations without having to sell the company itself. They have the same needs (due to the risk that one of the partners might die), and they simultaneously purchased insurance on each other’s life.

6. To Pay Off Estate Taxes

Estate taxes can be steep, so having insurance in place to pay them is essential to avoid jeopardizing assets or funds built for retirement. Use of insurance for this purpose is most common in large estates, and uses permanent (rather than term) insurance to ensure that coverage remains until the end of life.

7. To Provide Living Benefits

With the advancements in medicine and rising healthcare costs, people are living longer, but cannot afford to. Living benefits is an option to use death proceeds before the insured dies to help with obligations or necessities to ease the pressure on themselves and others.

How Much Coverage Should I Buy?

The face amount, or “death benefit” of an insurance policy (i.e., the amount of proceeds paid to the beneficiary) should be high enough to replace the after-tax income you would have earned had you lived a full life, presuming you can afford the annual premiums for that amount. In other words, the insurance replaces the income you didn’t have the chance to earn by living and working until retirement due to a premature death.

The proper amount of insurance allows your family to continue their lifestyle, even though your income is no longer available. The actual amount that you should purchase depends upon your present and probable future incomes, any special circumstances affecting you or your family, and your existing budget for premiums.

Whole Life or Term?

Some people prefer to drive Cadillac, Lincoln or Rolls Royce, which come with all of the electronic gadgets that make driving safe and as easy as possible. Others prefer less customized makes, equally reliable to their more expensive cousins, but requiring more hands-on attention.

Whole life is the “Cadillac” of insurance; these companies try to do everything for you, specifically investing a portion of your premiums so that the annual cost doesn’t increase as you grow older. The investment characteristic of the insurance means that premiums are generally higher than a similar term policy with the same face value. After all, whole life insurance is intended to cover your whole life.

Term insurance, on the other hand, is temporary life insurance. There are no excess premiums to be invested, and no promises or guarantees beyond the end of the term, which can range from 1 to 30 years. The annual premium for term insurance is always less than whole life, lacking the investment component, but your premiums will rise (often substantially) once the term period expires.

Both types of life insurance, term or whole life (or one of their derivatives) have benefits and drawbacks; both have their place depending upon the needs, desires, and financial objectives of the purchaser. A knowledgeable professional insurance agent can help you decide which type of policy is best for you depending upon your circumstances. But whichever you select, be sure that you have enough coverage to meet your objectives in the short term and the long term.

The Last Word

Some people mistakenly believe that life insurance is a scam. This is because the money for premiums is lost if death doesn’t occur during the coverage period (in the case of term insurance), or because many people live to a ripe old age and continue to pay their permanent insurance premiums. Such naysayers compare life insurance protection to gambling, and forgo the protection entirely.

There are others, who have the belief that life insurance does not help them. To those individuals, the answer is: You are absolutely correct! The truth of the matter is that life insurance is a way for caring and responsible people to help ensure that their family can continue to move forward in the event of your untimely demise, a truly difficult time of loss. Of course, there is no bet – you will die, but no one knows when. It could be today, tomorrow, or 50 years into the future, but it will happen eventually.

Do you have life insurance? Why or why not?