Term Life Insurance Lowdown

Return of Premium Term Life

-- By Pushpa Sathish, Staff Writer

Term life insurance is not a very popular option simply because it makes death look like the best way to gain any return from your investment. Beneficiaries of a policy have to lose a loved one to gain monetary advantages from the deal.

But there is one term life insurance policy that offers a policy holder 100 percent of all premiums paid, even if he/she is alive at the end of the designated term – the Return of Premium (ROP) term life insurance. The premiums are a little higher than in a normal term life policy, but that’s just how the money is returned at the end of the term - the extra amount paid as premium is invested for capital growth.

The premium paid depends on the term of the policy, the longer the term, the less the premium. This makes sense since money grows more over a longer period of time.

Types of Term Life

-- By Pushpa Sathish, Staff Writer

When shopping for a term life insurance policy, bear in mind that there are three main kinds available:

• Level Term: While the death benefit remains the same for the full period of the term, the premiums stay the same for the entire period, stay the same for a certain period, or increase as the term goes by.
• Decreasing Term: The death benefit decreases as the term goes on while premiums remain the same for the entire term. This type of insurance is ideal for those who have financial obligations that decrease with the passage of time. 
• Annual Renewable Term: The death benefit remains the same for the entire period of the term while the premiums increase gradually.

State Insurance Regulators on – what every consumer needs to know about life insurance

National Association of Insurance Commissioners (NAIC) stated that most individuals know about the importance of life insurance. However difficulty is faced when it comes to deciding which type of insurance and exactly how much a person needs to put into life insurance. As part of the ‘Life Insurance Awareness’ month NAIC has put together tips and chunks of advice on how one should invest in life insurance. The association highlights the point that every stage of life is different and so are the needs at that specific time. It is not surprising therefore that an individual should consider different types of life insurance at different stages of his life.

Commenting on Term Life insurance the write-up suggests that young singles should consider investing in them. This is because the policy is renewable and can easily be converted to a cash-value policy for a set fee when they have more money. This type of life insurance is also recommended for those serving in the defense services. They can invest in low cost group term insurance that covers them while they are in active duty. Also Term Insurance is an excellent option for young families for both the spouses so as to help pay for child care and other domestic services.  Hispanic Business reports:

Consumer research conducted by the NAIC earlier this year indicates: -- Only 35 percent of young singles have life insurance. Furthermore, few young singles (28 percent) express high levels of confidence in knowing the difference between the two basic types of life insurance, term and permanent, and a similar number (27 percent) are highly confident that buying life insurance when they are young will guarantee their coverage later in life.

Advocating life insurance for the sake of survivors!

People who have suffered first hand the consequences of no life insurance know exactly how high on the priority list, having an insurance means. When an earning member of the family dies an untimely death, the survivors have a tough time dealing with the grief. If they have to deal with financial problems along with this they can land in a very difficult situation. Therefore one should buy a term life insurance at least so that they can be assured that their family members are taken care of financially while they battle with their grief.

In order to promote the concept of having a life insurance, the insurance industry has decided to observe every September as the National Life Insurance Awareness Month. With this they want to sensitize the Americans about the hard facts of life. This action is subsequent to LIMRA International’s research results that show that at least one third of the American adult population has not insured their lives. LIMRA International is a research and consulting organization for the insurance industry. The research revealed that this is primarily due to lack of coverage of young men and women. Seattle pi reports:

“The Life and Health Insurance Foundation for Education is a non-profit organization funded by the insurance industry that coordinates the national awareness campaign. It has a calculator on its site at www.life-line.org that consumers can use to determine their insurance needs.”

Why Term Life Insurance providers advertise more!

It is a simple case of demand and supply. While the demand for term life insurance may be high, the number of companies offering term life insurance policies is much more. The chances that a person might kick the bucket while being covered by term life insurance is quite less. Renewal of the policies is something that people generally go in for since no one wants to leave a lot of medical bills when they die. Apart from this the insurance companies do not have to make allowances for cash management. This is because there is no cash to be given to the policy holder if he is still alive at the end of the term.

No wonder that insurance providers consider this to be their cash cow. Hence term life commercials make up the bulk of insurance commercials aired during on television during day time. The benefits offered range from no checks on the information provided, no medical exams to no probability of being turned down for a policy. And they do manage to get a good piece of the ‘want to be insured’ market. A word of caution here – make sure that the deal that you are getting from your insurer is indeed the best deal!

Types of term life insurance you can choose from

Term insurance is a kind of life insurance that insures your life for certain duration of your life. The cover is for your life till such time as it is insured and there is no cash back should you survive the term The premium that you are asked to pay generally depends up on the type of tem plan you choose, the amount of coverage, your current age and the duration for which the insurance cover is desired. The different types of term life insurances are as follows:

Decreasing Term: As the name implies, decreasing term life insurance means that you are covered highest when you acquire the policy. As time goes by the coverage decreases and is the lowest when the plan is terminated. This kind of term life insurance has low premium which remains at that level as the death benefit decreases.
Level Term: In case of level term, the person who is being insured has to pay the same premium through out the tenure of the policy. In exchange he receives the same level of coverage for the complete duration. This obviously attracts a higher premium than decreasing term life insurance.
Renewable Term: In this case the premiums to be paid are not level but increase over the duration of the policy. However the death benefit will remain at the same level. The only good point about this is that the policy can be renewed easily and is guaranteed.

Follow this link to read more.

Is buying a Term Life Insurance a cheaper option?

Perhaps yes! This is what the figures indicate. Term Life Insurance seems to the least expensive life insurance after all. And there is a valid reason for this difference in pricing. When you opt for a term life insurance you are buying coverage for your life and nothing else. This implies that you are not looking at it as an investment option and a way to build up your cash reserves. This is in sharp contrast to life insurances like whole life insurance that have a built in investment component. This investment component is what makes the policy more expensive.

Though this sounds exciting, remember that if you are above 50, you will be charged a hefty premium for a term life insurance. In such a scenario it would be wise to probably go for a whole life insurance. Therefore before you decide to buy a life insurance policy, do your homework and figure out what your requirements are. You also need to assess the kind of coverage that you need and also the amount you are willing to pay for the policy. Best syndication reports:

Many whole life insurance policies call these investments "retirement savings," but there are many other ways to save for retirement without having to choose a life insurance policy that may not be the best for you

Critical Illness Living Benefit

Term life insurance is an investment that does not generate monetary returns as long as the policy holder is alive. But there is one benefit that generates interest-free cash even if the applicant has not died.

The critical illness living benefit allows holders to avail a sum of money if they suffer from a cardiac arrest, stroke, malignant cancer, deafness, blindness, multiple sclerosis, kidney failure, paralysis, coronary artery surgery or any life-threatening illness during the term of the policy.

There are various conditions that have to be satisfied before obtaining this coverage. Not only must the applicant and his immediate family be healthy at the time of application, they should also have a history of good health.

The Age 70 Rule

The age 70 rule makes it hard for people who are 70 and above to get life insurance cover. The Financial Services Authority of the United Kingdom is reviewing this rule which disallows those who will be septuagenarians or older during the lifetime of any product from buying the product as insurance. They can only purchase it as an investment.

This means that financial advisors who sell only insurance products are barred from selling fixed-term insurance policies to people who will become 70 years of age or more while the policy is still valid. The fact that only those advisors who fall under the regulations of the Financial Services Authority are allowed to sell these policies, makes them more expensive and rare.

With intermediaries not authorized to sell life insurance as an investment product, the Association of British Insurers (ABI) is campaigning to get the rule changed.

Things You Need to Know About Term Life Insurance

• Term life insurance is a cheaper alternative to whole life and variable life insurance policies.
• Except in the case of a Return of Premium Term Life Insurance, it accumulates no monetary value, i.e., you don’t get back the money you have paid as premiums, at the end of the policy period.
• The policy expires at the end of the nominated period, which can be between one and thirty years. If the policy holder dies within that period, his beneficiaries are paid the insurance in full.
• You will have to undergo a medical check before your premiums are decided. If you are old or suffer from any serious illness, your premiums are likely to be high.
• A few insurers allow you to renew your policy at the end of the term, but the premiums are likely to be higher, a rise that is attributed to the increase in your age.
• Some policies provide policy holders with terminal illnesses accelerated benefits. The premiums on such policies are higher than normal.

You Have a 1 in 8 Chance For Disability

You have auto insurance, home insurance, and pet insurance but you still don't have disability insurance. This shows that you are probably thinking chances of a house-fire are more than chances of you coming down with a disability. Statistics show that 1 in 8 of us can get disabled as opposed to only 1 out of 90 will have a house fire.

So, we are insuring for eventualities that may not happen and ignore disability insurance which you may need more. Normal life goes haywire if you are suddenly disabled and your medical expenses will upset all other cash outflow. Heart disease and back problems are the highest causes of disability and it’s not difficult to grasp what a stroke can do to a person.

Long-term disability can be devastating physically, emotionally and financially. Even a period of two years of disability can eat up all of a good savings build-up. So, if you have little or no savings and end up with a disability you are sure to be on the verge of bankruptcy.

What are the features of a long-term disability cover?
1. Long-term disability helps replace income for an extended period of time, usually ending after five years or when the disabled person turns 65.
2. There are two kinds of long-term disability insurance - non-cancelable and guaranteed renewable.
3. In a non-cancelable type you have extra security that your premium can never be raised.
4. In a guaranteed renewable your premiums can be raised but they are a lot cheaper at the time of purchase than a non-cancelable.

Waiting period: Most long-term disability insurance has a waiting period that starts with a low 60 days to 730 days. You can decide on the number of waiting days by assessing how long you can go without an income. Remember the longer the waiting period the lower the premium and the younger you start the better as in the case of most insurance.

Long-Term Care Insurance

The biggest fear, the seniors of our society have is that they have to depend on others for their day-to-day expenses. So, as the person ages requirement for hospital treatment increases and this can be financially crushing.

Traditional health insurance and Medicaid pay only a small amount or for only a limited stay in a nursing home. Therefore, we have a growing market for long term care insurance. Long-term care insurance pays for a stay in a nursing home, or for daily care at home and even adult day care centers.

The catch in this comes in the form of yearly increasing premiums, which can eat into an elderly person’s savings and can even lead to cancellation right before the actual need of such insurance. It’s not easy for the middle-income group to make daily payments of home care of $150 to $300 every day.

There may be benefits in both partners applying for long-term care insurance as providers sometimes offer discounts for one spouse. Many states have tax benefits in addition to the federal tax preference and this needs to be checked in your state. The increasing popularity of this type of insurance is evident as many employers are offering long term care as an employee benefit as group coverage.

Long-term care insurance is dotted with fraud for example; it is not uncommon for policyholders to need "continuous one-on-one assistance" in performing daily activities in order to receive benefits. To qualify, you would have to be severely ill and be in need of admission to an intensive care unit to collect under the policy.

It is always a good idea to make it a family decision and bring together all, your spouse, children, siblings, and closest personal friends. Give due importance to such shared decision-making, as it will help avoid some of the pitfalls that have been the curse of long term care insurance.

The government needs to step up for the benefit of our elderly and plug the loop holes through which agents con people into buying LTC that is really not affordable nor beneficial at the time of need.

Should you buy a Term Life Policy for long-term risk?

Is it wise to take out a term life policy for long-term risk? This question arises when you take out a term life policy for paying of long-term payments like a mortgage. Insurance companies have their agents enticing you with eventualities that can sometimes be too far-fetched.

If you have already got a whole life policy then you may consider a term policy to meet mortgage payments. Here you are ensuring that your family is not upset financially by paying off the mortgage if you die. So if you take a term life policy for thirty years you can rest assured of the insured amount in the event of your death within the specified term.

The annual renewable term policy is a good term policy for all cases. It comes with level premiums and death benefits, with term lengths of five, 10, 15, 20 or 30 years. In the annual renewable policy the insurance company might not renew the policy if your health starts to decline. To prevent this you could make your policy a guaranteed renewable policy. By getting this added the insurer guarantees to renew the policy whenever you want them to.

However, premiums of such guaranteed renewable policy will increase each time its renewed. Another option for people using term life policy for long-term risks is the convertible term insurance. These policies can be converted to permanent coverage ones. So if you can afford the premiums you can switch coverage.

If you have enough funds to tide over all this long-term risk - a term life policy is of no use to you. But if you feel this can help your family it might be worth a look. The next step is to find out how much money you will need and for what. The death benefit should allow your spouse to pay off debts, pay for college and invest for retirements and meet expenses for a number of years.

Refinance Your Term Life Insurance and Save Money

Refinancing may be the current trend to follow if you are in tight spot for want of cash. As interest rates for refinancing your mortgage or home equity is on the rise you might want to consider all your options. One area where rates are dropping is life insurance. It is similar to when refinancing mortgages began as rates dropped due to cashing-in on home equity.

Now is the time to refinance your life insurance. By refinancing your life insurance you may pay less for a new policy or buy more insurance for the same amount as your old one. It is a simple rule now that rates are expected to drop all through 2006 and mortgage rates are on a rise. Though all types of life insurance can be refinanced it is the term life insurance that was taken 5 to 10 years ago that has the maximum benefit. The amount saved can also be considerable as competition and increasing life expectancy force insurance rates to fall.

For a half million dollar policy, 40-year-old male could pay 300-350 dollars a year. Ten years ago, that would've cost probably 800-1000 dollars, forecasts Steve Weisbart from the Insurance Information Institute.

Read: Refinancing your life insurance may save you money

Shortcomings of Whole Life Insurance

The greatest drawback of a whole life policy is that fixed premiums are costlier than term premiums and may not allow you to buy the exposure you need. Moreover, life insurance is not needed through old age, because it is designed to care for a family that is wholly dependent on your income.  This type of insurance definitely looks less attractive than other investment options. Precisely because it takes at least 10 years for these policies to mature into any real cash value.

Tax breaks in IRAs, 401(k) plans, and other saving devices are much lucrative than the deferred taxes on life insurance policies. The other irritant is that insurance salespeople tend to push these policies because they bring heavier commissions.

If you want to learn more about reasons you might NOT want to purchase Whole Life, you can read an earlier article we wrote here.

The Money Building Factor

Universal Life coverage not only provides flexible life insurance protection, but also helps to grow money for the future. Much like whole life policies, universal policies too, make use of life insurance tax benefits. Universal insurance is more flexible because it allows you to modify the death benefits and also the amount of premium payments.

The best part of universal life insurance is that it relies on the cash value of a particular policy to account for adjustments in premium amounts and payments. Cash value is the sum total of premium payments and interest and yes, of course excluding mortality and expense charges. Cash value earns interest at a rate declared by the insurance company which may alter from time to time but you can be rest assured that it will never fall below a certain rate.

Read more about earning interest on your insurance policy here.

Death Benefit in Term Life Insurance Policies

Term insurance allows extensive death benefits to loved ones like passing money income tax free, should you die while your policy is in force. In case of your demise, the death benefit can offer monetary resources that shall help reduce debt, pay college fees, provide for your spouse's old age needs, or add-on to your spouse's income.

Benefits of Term Life Insurance

The best thing about Term life insurance is that it provides insurance protection for a particular period of time and you can actually choose from a range of one year to 30-year term periods. You can also get coverage to a certain age. Premium payments for various terms can be paid monthly, quarterly or annually depending on which policy you have undertaken. Though term insurance does not create a cash value, there are policies that allow extension of the term or conversion to a permanent or flexible premium adjustable universal life policy. Premium payables may swell after the initial term period depending on the policy you are in.

Since the costs incurred for term insurances are much lesser compared to whole life insurances, they are more suited to meet the needs of a family’s short term needs.

Term Life Insurance: Did You Know?

• Term life insurance is the most straightforward and easy to understand type of life insurance.

• It offers most affordable and convenient life insurance coverage to your family members.

• If you die, the coverage of policy can help the dependents continue to live in the same lifestyle as earlier.

• Effectively term life insurance gives you the most coverage for the lowest cost for a given term period.

• Its best to buy term insurance policy at an early age to get maximum benefits out of it.

• It is the safest bet if you need insurance for a shorter period of time instead of going for the whole life insurance.

• By choosing term life insurance you actually pay a (low) monthly premium based on the term length and amount of coverage you choose.

Forms of Term Life Insurance Policy

Term life insurance is said to be the original form of life insurance. It covers a specified term only, so it can be taken as a temporary form of insurance. It is also considered to be one of the most inexpensive ways to purchase a considerable death benefit on coverage per premium per dollar basis. If the insurer dies during the specified time period, the death benefit will be paid to the beneficiary. A term life insurance policy can be of various types depending upon its term.

Annual Renewable Term is one of the simplest forms of the policy with a term period of one year. If the insured person dies during the one year term, then the insurance will pay the death benefit to the beneficiary. The term period specified is followed very strictly. If the insured person dies even a single day after the last day of the policy term, no amount is paid. Annual term policy is not considered very cost effective.

In Level Term form of term insurance policy, the premium is same for the given period of years. The premium is the calculated by taking into consideration the cost of each year's annual renewable term rates averaged over the term, with a time value of money adjustment made by the insurer. Commonest time periods chosen by consumers are 10, 15, 20, and 30 years. Here, longer the term premium is level for, higher is the premium.

Term Life Insurance: Benefits

Term life insurance policies are an affordable alternative for those customers who cannot afford expensive permanent life insurance policies. It gives a fair chance to people belonging to different economical strata to cover their near and dear ones. It is absolutely advantageous to buy a term life insurance policy in comparison to whole life insurance policy.

Whole life insurance is expensive because of the huge initial investment. They can cost you thousand of dollars. While term life insurance is very affordable. They cost a few hundred dollars per year to the consumers. Also, term life insurance is quite simple to understand and has a flexibility of making personal choices. For example, customer can pay a monthly premium depending upon the chosen term length and the amount of coverage.

If you buy a cheap term insurance policy, you can easily invest the saved money yourself. On the other hand, in whole life insurance you require help from an insurance company, which are often very conservative in how they invest your hard earned money.

Term life insurance is good for short-term requirements. You can choose the policy depending upon your periodic needs instead of investing in a whole life policy. For example, parents can buy a policy that covers their children’s college education. This policy will expire only when the children graduate out from college. If in between this time period something happens to the parents, no hindrance will be created in the education of the children.

Evolution of Term Life Insurance

A term life insurance is a policy, which functions solely on the criteria of your life and death. If you live through your policy period, you loose the entire premium paid. On the other hand if you die within the coverage period, your nominees get the assured amount. Since, for an insurance company, it’s a wager on life; they usually ask for elaborate medical examination before enrolling someone for a term life insurance.

However, off late some companies offering term life insurances have done away with the required medical examinations. But there are riders to consider in such cases. Firstly, the cost for term life insurance without an examination significantly increases. Secondly, without an examination, the maximum amount of the term life insurance is limited, usually to about $250,000.

What is interesting to note is that term life insurance sector is undergoing a sea of change, as in the policy structure is moving away from its traditional periphery. Nowadays, there a certain companies that return a portion of the premiums paid at the end of the policy term on survival.  Further in some cases, term life insurance also has what is called a Critical Illness Option. This essentially means even a term life insurance would cover a critical illness if the policy holder is diagnosed with such an illness.

Getting free quotes for term life insurance is quite easy. There are over 250 insurance companies that offer term life insurances. Further, it is to be noted that the commissions paid to insurance agents vary significantly, thus, rates for term life insurances also varies.

Moreover, with changing market dynamics, the competition for term life insurances has also increased. Although the rates for term life insurance are now much lower, the requirements have become stringent to qualify for term life insurance. But as they say - nothing is a free baby.

Potential Market for Term Life Insurance

Term life insurance policies are increasingly being seen as the insurance of choice by professionals such as Doctors and Engineers. For instance, Doctors - who might be setting up their own clinics and might not have heavy fund flows in the first few years of their practice. Also, due to the fact that term life insurance can be purchased in large amounts for a relatively small initial premium is making it an attractive option for the for short-term insurance needs.

For catering to this segment, leading insurance companies are offering strong product portfolio in the Term life insurance bracket. The features of a term life insurance policy, which makes it a popular choice among those who might be cash strapped in the short run are: initial affordability and the option to renew the policy.

These Term life insurance policies can be renewed or continued at higher premiums in most US states up to age of 85 years or in some states even until 95 years. Many insurance carriers such as State Farm Insurance even offer online policy purchases.

Read More:Info on Term Life Products

MetLife Offers Three Term Life Insurance Products

MetLife has three term life insurance products for people with a temporary need of life insurance. The three products, which include One Year Term Insurance, Scheduled Term Insurance and Level Term Insurance, are suitable for those who need a large insurance cover but have limited budgets.(Latinoreader reports)

The One Year Term Insurance scheme offers the flexibility to have affordable insurance coverage now and also allows for the subscriber to upgrade to a list of permanent life policies in the future.

Can’t Pay Hefty Premiums – Opt for Term Life Insurance

People who cannot afford steep insurance premiums for a whole life policy often give up on their plans to cover their families for any eventuality. Most people are unaware that an alternative to the costly whole life policy exists. In fact, an affordable alternative - ­­­in form of Term Life Insurance. The affordability of a term life insurance policy springs from the fact that it is a pure insurance product rather than a mix of insurance and investment. On the other hand – a whole life insurance policy is expensive, mainly due to its investment aspect.

Usually, whole life insurance policies cost thousands of dollars a year, as opposed to the mere hundreds of dollars a year a similar term life insurance policies would cost. A Term life insurance product is fairly simple to understand. In most cases, a subscriber pays a monthly or yearly premium based on the term length and coverage amount. It allows for a considerable degree of customization too. As in, the coverage amount can vary from about $100,000 to millions of dollars, which can be further tagged on the basis of number of coverage years (say for 10, 20 or 30 years).

Even in Term life insurance policies there are a number of variations. The one being discussed here is the Non-Guaranteed Term Life insurance, wherein coverage is provided only for a short time (usually a year). This is a pure death-benefit protection. This is generally suitable for those who might not be in a position to pay for a long term policy, but still might want to cover their dependents with a solid insurance cover. At young ages such policies come quite cheap. However, the risk in this particular class of Term life insurance product is that your health might deteriorate and you could be unable to get another policy once the term is up. Further, the premium amount would continue to increase with every renewal as you continue to age.

Types of Term Life Insurance and Comparison with Whole Life Insurance

If you opt for Term Life Insurance, you will be covered for a specific term by paying the premiums. There are several types of Term Life Insurance covers. In Level term, you have a pay a fixed premium for up to 20 years. Another option is Annual renewable term, in which you will have the option of renewing your policy regularly, but at increasing premium rates. In Decreasing term, you can witness a steadily decreasing death benefit. It might help you and your family when you retire from your job.

In the other hand, Whole life insurance is designed to cover you for your whole life. These policies charge you a fixed premium each year, which is typically higher than term insurance. "MSNBC reports"

The advantage that insurance companies tout for whole life insurance is that, while part of the premium covers what term insurance would cost, the surplus resides in an account that pays interest and accumulates a cash value. As this "accumulation account" grows, your premiums can decrease over time.

Details of Term Life Insurance

There are several type of insurance covers in the market which are opted by people. Term life insurance a form of life insurance and is considered as a pure insurance protection because it builds no cash value. This is different from other life insurance policies which covers the policy for lifetime. This is a temporary form of life insurance that covers a specific period of time.

If the insured dies during the term, the death benefit will be paid to the beneficiary. As the term expires, the insurer often does not have to pay out. The simplest form of term life insurance is for a term of one year. The death benefit would be paid by the insurance company if the insured died during the one year term and no benefit is paid if the insured dies one day after the last day of the one year term. juiceenewsdaily.com reports:

The most common periods being 10, 15, 20, and 30 years. In this form, the premium paid each year is the same, and is the cost of each year's annual renewable term rates averaged over the term, with a time value of money adjustment made by the insurer.

Need of Term Life Insurance after the Hurricane

Filing a term life insurance claim can be one of the most difficult things a person has to do. A good preparation before a disaster like Katrina can save the people from stress. Survivors of Katrina and 9/11 understand better about Term Life Insurance. It is very difficult to put the life again on the right track after such disasters. But according to life insurance experts, the process of filing a life insurance claim after the death of a loved one can be eased by simply being prepared.

Proper preparedness begins when you purchase your policy. A common mistake that is often made at the beginning of the process is not buying an adequate amount of insurance. It's very much essential to carefully consider the total amount of financial support your family will need at the time you purchase your life insurance policy. emediawire.com reports:

In addition to making sure you have an adequate amount of coverage, it’s a good idea to ensure that your policy is "titled" correctly and that the named beneficiaries are accurate and up-to-date with current address information. Verify that the dates of birth and social security numbers on file with the insurance company are correct, as errors can cause the benefits to pass through probate and delay the transfer of funds to your loved ones.

How Term Life Insurance Works

Term Insurance has become popular because of low interest rates. Term life insurance provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Term Life Insurance is generally considered as a better option, where the premium buys protection only in the event of death.

The three key factors to be considered in term insurance are: face amount (protection), premium to be paid (cost to the insured), and length of coverage (term). Various insurance companies sell term insurance with many different combinations of these three parameters. The term can be for one or more years. The premium can remain constant or increase depending on the situation. juiceenewsdaily.com reports:

A common type of term is called annual renewable term. It is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time.

Life Insurance Premium Rates to go down

It is expected that Insurance Premium rate will go down in the future. The insurance market has witnessed significant increase in competition. Also the improvement in mortality rates suggests that premium rates for term life insurance and permanent life insurance will drop by three percent in 2006. Term life insurance already has seen a sharp decline in interest rates. This decrease in the last decade enabled people opting for term life insurance in large numbers.

Rate reductions for the best risks were even steeper, thanks largely to underwriting and pricing refinements. The effect of these forces had put the lowest rates available in 2005 to less than half of what they had been ten years earlier. Operational efficiencies and lower policy lapse rates also contributed to the forces resulting in the drop in life insurance premium rates. communitydispatch.com reports:

About half of individual policies bought are now term policies, up from one-third in 1998. Because term policies basically provide a death benefit for a relatively short period of time, their premiums are lower than premiums for permanent life insurance, which pay death benefits no matter how long you live.

Need of Term Life Insurance aftermath Katrina

The Hurricane Katrina has left a question in everybody’s mind, whether everyone has a valid insurance to counter the real life situation arisen after such tragedies. The devastation caused by Katrina is enough for the Americans to think that they need some sort of insurance for a better future. A Regular Term Life Insurance will definitely be helpful for the people in the worst scenarios.

Unlike the mortgage life insurance, term life insurance provides cash to the beneficiary in case the policyholder dies. The beneficiary then can decide whether paying off the house is the better option or not. The beneficiary will be in a better position to decide this keeping in mind the existing mortgage rate. Term Life Insurance is definitely better than any other life insurance. It also can be used to pay the auto loan or car loan. courant.com reports:

Anything but term life insurance. That's not an absolute, but 98 percent of people would be better off with term insurance than whole life, variable life or any other policy that mixes investments with insurance, Hunter said.

Read More: It Doesn't Pay To Buy Some Types Of Insurance