Term Life Insurance Lowdown

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.