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Life Insurance Basics

Not sure if you need life insurance coverage? You’re in the right place. A life insurance policy can help replace your income and pay for things like housing, living expenses and educational costs in the case of an unexpected death. Our helpful online resources provide plenty of solid life insurance information, so you can understand the type of coverage that you may need to meet your needs, life and budget.


What to consider with your life insurance coverage

If you’re thinking about life insurance products, here are some questions you should be asking:

Why do I need life insurance coverage?

How do I choose a life insurance product?

How much life insurance coverage do I need?

What fees and charges will I pay?


Term life insurance is probably one of the most popular forms of life insurance. In exchange for a premium that stays the same for a specific period, you get an income tax-free death benefit. That way, if something happens to you, your family can continue to pay for the things your income provided with help from the benefits of your term life insurance policy.


Advantages and disadvantages

Term life insurance is easy to understand, inexpensive and can provide essential protection for your family. Because it typically doesn’t cost a lot, you can buy larger amounts without having to spend tons of money.


The downside is that term insurance isn’t a permanent life insurance solution. Once the term ends, the premiums can increase dramatically. And, the older you are, the more expensive it gets. Fortunately, you can convert many term life insurance policies to a permanent insurance policy like whole life insurance, universal life insurance or variable universal life insurance.


Keep in mind that as your life changes (for example, marriage, birth of a child or a job promotion), so will your life insurance needs. You should weigh any associated costs before making a purchase. Life insurance has fees and charges including costs of insurance that vary based on the insured person’s gender, health and age. There are additional charges for riders that customize a policy to fit your individual needs.


Benefits of term life insurance

Term life insurance helps you take care of your family, your home or your business if something happens to you. Term is simple and predictable. You pay the same premium at regular intervals for the length of the term. That amount won’t change unexpectedly. As long as you pay it, your policy won’t lapse.


Finally, you aren’t stuck at square one at the end of the term. You have the ability to convert your policy to a permanent product without evidence of insurability. The conversion can be made to any permanent plan of life insurance offered at that time. It’s easy and could be cheaper than continuing to buy one term policy after another.


There are several different types of term insurance you can consider:

Renewable Term Insurance.
These policies have a provision allowing you to renew coverage at the end of the term without having to show evidence of insurability. The company has to renew your policy even if your medical condition has deteriorated. However, the premium rate will rise with each renewal.


Convertible Term Insurance.
These policies allow you to convert your term coverage into a permanent policy without providing evidence of insurability. Premiums for convertible policies are usually higher than for nonconvertible policies. Once converted, the premiums for the permanent coverage will be higher than those of the term policy with the same death benefit. However, the permanent policy premiums will remain the same while the term premiums will rise.


Level Term Insurance.
These policies provide a fixed premium for a certain number of years, usually 10 or 20 years, while the death benefit remains unchanged. The death benefit is the amount the life insurance company will pay, as stated in the policy, when the insured person dies. The advantage is that you lock in a certain rate for the period of the policy. The disadvantage is that the premiums will tend to cost more than the earlier years of the renewable policy, and when the level policy expires, premium rates will jump considerably if you want to renew with another level policy.


Decreasing Term Insurance.
The death benefit in this type of policy decreases over its term. For example, you might start with $100,000 of coverage and the amount of coverage decreases by $10,000 each year for 10 years. The premium usually remains the same over the term of the policy. This type of insurance allows you to pay the same premium for less insurance over time, rather than have your premium increase for the same amount of insurance.


Increasing Term Insurance.
This kind of policy starts at one level of death benefit which gradually increases over the life of the policy. You may start with a $100,000 policy and increase the death benefit $10,000 each year for 10 years. The premium will increase each year. This kind of policy may be appropriate if you see your insurance needs growing in coming years because, for example, you expect to have more children.





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