TERM INSURANCE: Insurance for a specific length of time.
- Face amount (Death Benefit) is payable only if death occurs during the stipulated years
- Protection is only for a limited number of years
- Pays nothing if the insured lives past the end of the term coverage period
- Why buy Term Life Insurance:
- Specific Time Need
- Mortgage
- Long Time Loan
- Children's Welfare
- Children's Education
- Income Replacement Need
- Contractual Obligation
- Court Orders
- Key Employee Replacement
- Equalize Inheritance
- Income Replacement
- Cheap premiums for immediate needs - You have a great need and lower cash flow
- Convertibility - Protects future insurability if converted. If the correct policy is purchased you can buy a Whole Life Insurance Policy or Universal Life Insurance Policy at a future time without proving insurability again. That means no health questions. You will need to pay the attained age premiums though. Choosing the right company for this to work nicely can be tricky. Companies with very low prices for term insurance may have awful prices on the converted products. Strategize with us by call at 607-843-8860 or by email at insurance@drickardinsurance.com.
- Advantages:
- Easy to Understand
- May be Renewable and/or Convertible
- An important feature to look for in a term contract is its renewability or convertibility. Can the policy be renewed, and if so, how many times or until what age?
- Convertibility means the policy can be exchanged for a permanent type of coverage, without the need to prove insurability. When a term policy is renewed or converted, the premium for the new contract will be based on the insured's attained age, which is the age at the time of renewal or conversion.
- Low cost - However at the end of the term if you still need life insurance the new premiums may be shocking!
- Disadvantages:
- No cash value
- Even though the policy has no cash value, there are return of premium term life insurance policies that may be available to you.
- Coverage is designed to end before death
TYPES OF TERM INSURANCE
- Annual Renewable Term Insurance (ART)
- The face amount remains level as the premium annually increases. Most ART contracts remain in force to age 65 or 70. There are some companies that write an ART to 100. The ART's are usually the lowest initial cost of all term contracts. However as time goes on they become some of the most expensive.
- Renewable Term Insurance (5RT, 10RT, 20RT, 30RT)
- The premium and face amount remain level for the length of the term. At the end of the term the policy may continue for another term when you pay the more expensive attained age premium. You will not need to prove insurability.
- Level Term
- The premium and face amount remain level for the term. Coverage is only for a specified number of years, such as 5, 10, 15, 20 or 30 years. The policy is not guaranteed renewable. We suggest making sure to get a convertibility option in this type of policy.
- Decreasing Term
- The face amount decreases as the premium remains level. Normally this type is used for mortgage insurance. While the traditional decreasing term declines on a straight line, many companies can design a contract's face amount to decrease consistent to the unpaid balance of a mortgage. Even the death benefit may be payable in installments that correspond to mortgage payments. The mortgage interest rate and years remaining on the note determine the amortization schedule.
- Return of Premium Term
- While keeping characteristics of the types of term policies above, for an additional premium the insurance company will refund all the paid premiums to the owner at the end of the term if death has not occurred.
WHOLE LIFE INSURANCE: This policy type includes those forms where the face amount is paid on the death of the insured whenever death occurs. Should the owner pay all the premiums, will contractually never increase - the policy will remain in force until death.
- The face amount will be paid regardless of the age at death of the insured
- Continuous premium payments (Disappearing premium may be an option.)
- Cash values
- Why Buy Whole Life Insurance?
- Permanent Protection
- College Planning
- Estate Protection
- Retirement Planning
- Estate Creation
- Estate Taxes
- Business Needs
- Gifting
- Final Expenses
- Advantages:
- The premium remains the same throughout the life of the contract.
- In case of a lapse, the policy may stay in force, depending on the contract purchased.
- Cash values (growing tax deferred) are available for loans, assignment, emergency use, etc.
- Safety and guarantees.
- Disadvantages:
- Initial cost is higher than term insurance.
- Cash value is NOT paid in addition to death benefit.
- Lost investment opportunity
UNIVERSAL LIFE: A FLEXIBLE premium, ADJUSTABLE benefit, FLUCTUATING cash value life insurance contract
- Why Buy Universal Life Insurance:
- Permanent Protection
- College Planning
- Estate Protection
- Retirement Planning
- Estate Creation
- Estate Taxes
- Business Needs
- Gifting
- Final Expenses
- Mortgage
- Long Time Loan
- Children's Welfare
- Children's Education
- Income Replacement Need
- Contractual Obligation
- Court Orders
- Key Employee Replacement
- Equalize Inheritance
- Income Replacement
- Advantages:
- Contract Flexibility
- Changeable Death Benefits
- Changeable Premiums
- Pay policy up early or stop paying for a while.
- Custom designed to fit each insured's life goals.
- Disadvantages:
- Policy planning must be revisited us the insured needs change.
- Non-guaranteed mortality charges.
- Low guaranteed interest rate.
- Option "A" vs. Option "B":
- "A" includes the cash value within the death benefit - Cash values grow FASTER than option "B".
- "B" pays the cash value in addition to the death benefit - Cash values grow SLOWER than option "A".
OTHER LIFE INSURANCE OPTIONS -
INDEXED UNIVERSAL LIFE (IUL): The "Index" concept was first introduced in the mid 1990's by several insurance companies for their annuity products. It is now widely marketed with numerous carriers through the Universal Life product. The IUL's mortality and expenses charges are similar in design to that found in the traditional Universal Life contract. The difference is how the cash value accrues. The cash value growth is linked to the return of a stock market index - such as the S&P 500. The contract guarantees a "no-loss" for the cash values on each anniversary date.
- Example: The contract's anniversary date is January 1. Should the S&P 500 be the benchmark used and it increases by 10% over the next 365 days, the cash value would increase by some maximum percentage as stated in the contract - such as 6.5%. If the S&P 500 increased by 4% in the same timeframe, then the cash value would grow by 4%. Should the S&P 500 decline by 5% (or any percentage lass) the values would not decrease from the prior anniversary's value. Thus, a no loss guarantee.
Note: Carriers use various methods of cash value crediting and benchmark calculations. The example above is simply one such calculation.SINGLE PREMIUM POLICIES: (Whole Life - SPWL; or Universal Life —SPUL): One single premium paid up life insurance policy. For example a single premium payment of $100,000 provides for a guaranteed level death benefit, perhaps $225,000 depending an the insured's age, sex and health status. The contract has a guaranteed cash value that grows tax deferred. Actual death benefits and cash values are dependent an interest rates credited and the cost of insurance charged. There could be income tax disadvantages (and penalties) should the cash value be withdrawn prior to age 59 1/2.
SURVIVORSHIP LIFE: Sometimes called second to die insurance. Usually this is a form of Whole or Universal Life Insurance. It is written as one policy covering two lives and the death benefit is only paid after the second death in order to protect the estate from taxes that could destroy the estate.
Guaranteed Issue Life Insurance - There are no health questions to be answered to get this type of Whole Life Insurance policy. However the death benefit is reduce for up to three years, depending on insurer. Also, we have not seen one of these policies available for anyone under 50 years of age.
All prices, programs, features, underwriting, offers, representations and companies shown in this site are subject to change without notice. We may add or discontinue a company or program or an insurer may change underwriting criteria or product line availability without notice to us. With the insurance industry constantly changing we may not be able to keep the site up with the latest information. For the up to date info please contact us. All insurance applications are always subject to current underwriting rules, acceptance of the insurer and adequate premium paid.