What is Term Life Insurance?
Term life insurance is the least expensive type of life insurance. Coverage is provided for a specific period of time (Usually 5, 10, 15, 20, 25 or 30 years). Premiums are generally extremely affordable, allowing for the purchase of large amounts of coverage at low rates. Common uses include covering financial responsibilities of the insured in case of a death, and coupling with whole life or other permanent plans to provide maximum benefits at a low cost.
The proceeds paid by the policy can cover funeral costs, pay off a mortgage or provide supplemental income to replace lost wages. In the vast majority of settlements, there are no federal or state taxes due, and many "payout" options are available. The beneficiary can choose to invest or spend the proceeds, or keep the funds with the current insurer.
How Often Do Premiums Increase?
Your premiums are guaranteed not to increase for the duration of your policy. For example, if the policy is a 20-year guaranteed term plan, the rate will remain level for the entire policy, regardless of any change in health. However, if you wish to extend coverage beyond the initial guarantee period, the new cost will be based on your current age, probably resulting in a higher premium. You can also convert the policy to a different plan, although the price will change.
How Do I Determine How Much Term Coverage I Need?
The amount of life insurance coverage you need will vary depending on your particular situation. Generally, the number of people that are dependent on your income will greatly influence how much should be in effect. Other major factors that will impact the decision include the outstanding balance on a mortgage, car loan, funeral expense costs, and other obligations. As outstanding debts and liabilities begin to reduce, often, the need for coverage also reduces.
Future expenses also must be considered such as anticipated education costs for your children, estate taxes, and any business expenses associated with self employment. State or public college tuition and other costs can easily reach $120,000 over a four-year period. Having an open discussion with your spouse regarding these expenses should always take place.
Although you determine how much coverage you need, most companies will only allow you to apply for a specific amount, which is based on income and age guidelines. For example, if the income of the principal applicant is $40,000 per year, it is extremely unlikely that a $10 million face amount will be approved. If many of the assets are owned through a usiness, a buy-sell policy may be appropriate.
How I Do Choose How Long I Need To Keep The Policy?
Each situation is different. Perhaps the three most important factors to be considered are the number of years left until retirement, and the age of your children and your current financial situation. As an example, if your youngest child is nine years old, you may wish to consider a 15-year term policy that will provide coverage until they have completed college. Naturally, if your youngest child is 15 years old, a 10-year term policy might be more appropriate.
However, if you have existing unsecured loans that represent significant liability and obligation, this must be considered. Unless you are expecting a major cash windfall to pay off the loan, until at least 80% of the principal is paid off, you may wish to have appropriate coverage to pay it off.
How Do Life Insurance Rates On This Website Compare To Other Prices I See Online?
The quoted rates that you see on our website are guaranteed to be the lowest allowable prices available for your particular rate class from each company. Of course, the final determination of your premium is made by an “underwriter” of the company that you apply with. Once the policy is approved and the rate is established, you may either accept or reject the offer.
We never charge fees and there is never a cost or obligation when utilizing our resources. It is also possible that you may receive an offer from our website that is lower than other published prices. Since we routinely update our software and quoting engine, a specific carrier may offer the lowest rate for a specific type of coverage, but another carrier may introduce a less expensive option the following month.
Do I Need To Take a Physical To Get Coverage?
To qualify for the better rates, often an at-home exam is required. However, it is much less invasive and less time-consuming than a regular physical. The insurance company also pays the full cost of the exam and you are not under any obligation to accept the insurance offer.
If you do not want anyone coming to the home (or you traveling to another location), "no-exam" ("no-physical") policies can be purchased. You will still need to furnish current medical information, including results from your most recent examination. However, sometimes, the offer you receive may be slightly more expensive compared to the price of a similar plan that allowed the at-home exam.
How Long Does It Take To Approve A Policy?
There are many factors that can affect the process. Generally, a policy can be approved within 14-28 days. However, if additional medical information is required, the process could take longer. Conversely, if there are no present (or past) conditions, and you are under the age of 50, an official offer can be processed in less than two weeks.
Can I Choose And Change A Beneficiary?
At the time the application is submitted, your beneficiary (who you choose) must have an "insurable interest." That means that the beneficiary you pick must be directly impacted if the applicant dies.
Of course, a family member or business partner are the most likely options. You can not pick a person you do not know and/or have no relationship with. An exception is often made for charities and organizations. As the owner, you can change the beneficiary designation at any time.
Can The Company Cancel My Policy?
As long as you pay your premiums by the designated due date (a grace period of 31 days may also apply), your coverage can not be canceled. However, you can terminate a plan at any time, regardless of how long you have owned the contract. You may be entitled to a pro-rated refund, based on the unused portion of coverage for that year, and the company policy.
Your benefits will remain active during the grace period (if applicable). However, if your policy is part of a group plan through your employer, termination from work will likely cancel a portion or all of the coverage. You may have an option to convert to a personal policy.
Does The "Affordable Care Act" (Obamacare) Legislation Impact Life Policies?
Yes, although it is a small surcharge. Payments received from life insurance contracts are considered "unearned income" and subject to a 3.8% Medicare Tax. However, it will only apply to households with more than $250,000 of salary and income. The portion of the legislation relevant to this extra charge is the NIIT and it became effective in 2013.
How Much Are Broker Or Website Fees?
You should never pay any fees or extra charges to a broker,agent or website. They are compensated directly by the insurer and it has no impact on your premium. Thus, whether you buy a policy directly from a company such as Transamerica through our website, or use assistance and guidance from a broker, the rate will be identical.
However, utilizing a website will typically save you money, since you can quickly compare multiple plans, and quickly learn what specific companies offer the lowest price for the specific policy you need.