by Albert Cohen
There are many types of Life Insurance: Whole Life, Universal Life, Final Expense, and Indexed Universal Life, and I will be touching on each of them in future writings. However, today I would like to talk about Term Insurance the most affordable and sometimes the best choice to handle your Life Insurance needs.
Term Insurance is just what the name implies. You buy a Life Insurance Policy for a specific amount of time, usually 10, 15, 20, and 30 year increments. If something happens to you during that specific time period your beneficiary gets the face amount of your policy. The primary disadvantage of this kind of Life Insurance is obvious, if the time period ends and you are alive the policy ends and you no longer have insurance and you are out all of the money you paid for premiums.
There are things you can do to mitigate this disadvantage, and I will cover that later. But first all of the advantages:
1. The price: for the most part a Term Life insurance policy is the least expensive of all private Life Insurance with the exception being accidental Life Insurance.
2. Solves a problem in a specific time frame: worried about paying off your 30yr mortgage, or the kids college tuition in the next 20 years, or maybe replacing an income while you save for retirement. If tragedy strikes these problems can be solved by a Term Policy using the least amount of resources.
If everything works out according to plan you will still be alive when your term policy ends. If the problem the policy was meant to solve no longer exists the reason for Life Insurance may no longer exist either. However, you have paid premiums for up to 30 years and now have nothing to show for it. This situation can be addressed in two ways.
First, some term policies can be converted into permanent life insurance sometime after the issue date. Your agent will be able to explain when and how this can be accomplished.
Second, you can opt for a Return of Premium (ROP) rider on your Life Insurance Policy. Simply put, after you have made all of your premium payments on your policy and the term is over, the Insurance Company will refund all of your money to you. This coverage is usually more expensive than a simple term policy but some companies offer an ROP rider that is more affordable than others and once again your Insurance Agent can guide you to a policy which meets your needs and budget.
Every person who needs Life Insurance is different and a good agent will tailor a policy which fits your needs, but do not overlook the simple Term Policy, the workhorse of the Insurance world.