Term Life Insurance | Investing In Term Life Insurance Benefits All
Term life insurance is also called term life assurance. This life insurance is the original form of insurance and the intention is to provide only insurance cover and nothing else. This type of life insurance does not build any cash value. This is in contrast to other life insurance where you are given lucrative deals which are more commercial form of insurance, such as the whole life insurance, universal life insurance, and variable universal life insurance.
Term life insurance as the name suggest provides coverage for a limited period of time. You can decide this period which is also called the term. Once this term is over, it is up to you to decide whether you would like to discontinue or you would like to continue with the policy by paying increased premium on the coverage. This policy is designed to benefit to the beneficiary of the insurer once the insurer is dead. So if the insurer is dead the benefits are passed onto the beneficiary in the policy. The benefits can vary between different people and it depends on what are the benefits that are covered in the policy. Term life insurance is definitely the cheapest form of life insurance which a purchaser can buy to help his loved ones after his death.
The working of term life insurance is the same like that of any other insurance policy. It satisfies the claims against the what ever is covered at the time of purchasing the policy. But it also has a condition that the monthly premium should be paid up to date. If you miss even one of your monthly premiums your policy gets lapsed. So it is very important to keep a track of your insurance payment. Second condition should be that you should be in the contract. If your contract with the insurance company is expired then you won’t get the benefits. For example auto insurance will satisfy claims against the insured in the event of an accident. Similarly Life Insurance Company will satisfy insurance against anything that is covered in the policy in the event of a sudden death while the person is under cover. In the event of nothing happening to the insurer and the term of the insurance ends, then the insurer will get nothing. This is purely risk protection.
One thing is for sure, one should be prepared for any eventualities that may happen in your life. This is what the word insurance means. An insurance company when providing cover to any one has to take risk, many times it has to pay more then what an insurance company has received from an insurer, and in many cases they don’t have to pay anything and thus recover the loses from those who do not claim anything. No matter whatever is the case the society gets benefitted with life insurance. After all just by having this sense of being insured can make your life relaxed. You can even get more information on life insurance from the internet or from an insurance broker.
Comments
Comment from LCHLADY
Time May 23, 2009 at 3:10 pm
I would say you would not be wise to cancel a whole life policy for a term, as what people don't know & agents neglect to tell them, is after the level period has ended, i.e.10 year term, 30 year term, the policy changes into a annual renewable term, which means the premiums increase dramatically & then will increase yearly from that point, going forward. So generally they are no longer affordable, any new policy you will be at a higher premium as it will be based on your current age or worse yet, you may now have a condition that makes you uninsurable.
At the very least, you may want to supplement with a term policy for short term coverage, but keep your whole life policies.
Yes, it is common to have dividends pay the premiums. You can call your customer service & tell them you want to change the dividend option to premium & your mode to annual. If you are not allready paid to the anniversary date, then you can also have the dividends pay you to that date to get everything synched. Then the dividends will pay the premium automatically after the grace period has ended.
Unless you plan on repaying the loan, then you may want to withdraw the dividends. Yes, you don't have to repay a loan, but the problem is that you OWE the insurance company the loan interest, so if it's not repaid, then the interest is taken out of the cash value & increases the loan balance, so this creates a snowball effect, as your loan interest will continue to increase yearly. Eventually the loan balance will cause the cash value to go into a negative & YOU will lose the policy.
So, if you pay the loan interest when it's due yearly a loan is ok.
Comment from Lai L
Time May 26, 2009 at 7:32 pm
you have it correct. a WL policy is actually a series of guaranteed renewable term policies of declining amount, coupled with a savings account [the cash value] that grows over time. The DB is fixed and includes both the term insurance and savings account [cash value].
dividends, if you get them, add either more cash or more insurance (or both).
UL is more complex … I believe that the minimum guaranteed portion of the cash value is part of the death benefit but that, if the "investments" do super well, the actual policy payout may be more than the DB.
and this may depend on the company and policy as well.
***
the various state insurance commissioners require life companies to invest in "appropriate" securities .. which means they have a portion in bonds and mortgages.
alas, bonds and mortgages tend to underperform the stock markets over very long periods [decades] and thus buying term [which has the cheapest sales commissions as well] and investing the difference in mutual funds usually works out better for most middle class people.
does this help?
Comment from Joie
Time May 23, 2009 at 2:26 pm
Life insurance is NOT an investment. Suze Orman is correct. Take the term policy which will be cheap and provide you with more insurance for your dollar now when you need more insurance. Take level premiums for 30 years.
Whole life and universal life are more expensive policies that just put a lot of money in the agent and insurance companies pocket. That is why they want to sell it. Do the other investments you mention and you will be fine.
Why put money into a whole life policy and they you have to borrow your own money to get the money out? Put your money into something solid that later it will be your money to do whatever you want with it.
Listen to Suze Orman. She knows.
Universal Life is part term and part whole life. The life insurance premium called (mortality rates) go up every year so the customer never knows how much they are actually paying for the insurance cost.
This is the way it works. I explain it this way. It is like you have a savings account. You deposit money into that account every month. The insurance company takes out the cost of the insurance every month out of the money you have on deposit. So, you see you never know how much the insurance cost is unless you ask. That is because you just keep on making deposits. The deposits are not the cost of what the insurance company is charging you for insurance. Sounds confusing? Ask your insurance agent for an illustration of what the mortality costs are. If they have no clue what your asking for then find a new agent.
Most customers do not know this. Most life insurance agents do not know how universal life insurance policies work. So, be careful what people tell you.