Low Cost Life Insurance
Need low cost life insurance? Take a look at the budget friendly option of a term life insurance policy. Term life insurance policy premiums are generally much better low cost options for life insurance than cash-value policies (universal and whole), especially if you are young and in good health. A low cost term life insurance policy does exactly what you expect it to do by financially taking care of your beneficiaries if you die. Generally speaking, most Americans are under insured and carry permanent life insurance which is far more expensive than term life insurance. This is a fundamental problem if the main bread winner dies. It is important to understand that permanent products pay a much higher premium, in the vicinity of 10-15x more. So in retrospect, a $1,000,000 term is essentially the same cost as a $150,000 permanent product. What would you feel better with? Here's the basics of a low cost term life insurance policy:
You typically buy a low cost term life insurance policy with a specified time period, usually one, five, ten, fifteen, twenty, twenty-five or thirty years. During that "term" you pay a specified premium. Some consider a return of premium (ROP) term which if you outlive the contract your are refunded all premiums paid in. Your beneficiaries will receive a death benefit if you die during the term of the life insurance policy.
Seems simple enough, right? Well, as with all insurance, there are little complexities and loop-holes you need to fill.
What about when your term is over? That's where renewable and convertible term insurance comes in. For example, if you want a basic 10 year low cost term life insurance policy with the death benefit to stay the same throughout the term life insurance policy, and at the end of the term you would like to "convert" to a different term life insurance policy such as a cash-value policy, without taking another medical exam, your contract better have a conversion privilege. This is very important if your health diminishes. In that case you would choose a level term convertible life insurance policy. Conversion is the most important feature in a term life insurance contract.
Term life insurance does not build cash-value or have the tax benefits like universal or whole life, but it can be a great option for someone who would like life insurance, but can't afford the higher premiums. If you look very close at a permanent product by taking the present value of the premium stream verses the cash value you will realize it may be more advantageous to buy term and invest the difference. It is apparent agents fail to present the numbers in this fashion as the rate of return is very low and not guaranteed but projected.
Here is a check-list to help you decide if a low cost term life insurance policy is right for you:
You're on a budget and cannot afford a very high premium.
You are young or old, and in good health.
You are looking for a simple, straight-forward, low cost life insurance plan to protect your beneficiaries.
When checking with your agent on term life insurance, ask a lot of questions. As stated, agents do not receive as much commission on term life insurance verses cash-value policies so you may have to probe a little for more information.
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