20 Year Term Life Insurance
Although term life insurance is available in a variety of terms, the 20-year term policy is one of the most popular. The term is long enough to satisfy many temporary life insurance needs, yet still short enough to be available to most people.
The Underwriting Process
While specific underwriting requirements vary from company to company, generally speaking 20 year term life insurance is not available to individuals under 18 or over 65. Minors are generally not eligible for any sort of term life insurance, while many companies have a cutoff age for various term policies. Consult a licensed professional insurance agent for more specific information.
Upon filling out the application and paying the first premium installment (usually one month’s worth), the policy is immediately bound for at least a partial amount of the face value. This covers the proposed insured during the underwriting process, so a death benefit may be payable even before underwriting is completed.
The next step depends mainly on the proposed insured’s age and the face value of the policy. The older the proposed insured, and the higher the policy face value, the more stringent the underwriting requirements. Underwriting may involve anything from a simple health questionnaire to a full-blown, physician supervised physical with EKG. Most policies won’t require underwriting more complex than a nurse-administered physical and blood test.
Issuing The Policy
Once the underwriting requirements are completed, the policy may be issued at standard rates for reasonably healthy people, preferred rates for particularly healthy people, or surcharged or “rated” rates for individuals found to have health problems. Even if one company declines a policy in underwriting, one may look for coverage with companies that specialize in high-risk cases (albeit at often significantly higher premiums). Only individuals with extremely severe or terminal health conditions such as certain forms of cancer are truly uninsurable.
After underwriting completes, the insurance agent will hand deliver the policy to the insured. The insured then signs a receipt acknowledging they received the policy. This process is known as policy delivery and signals the official beginning of life insurance coverage at face value. In most states the insured has a 10- to 21-day period after policy delivery in which they can return the policy for a full refund. This is called the “free look” period. As a matter of company policy some insurers offer a free look period longer than mandated state requirements, up to 30 days in some cases.
How 20 Year Term Life Insurance Works
As its name suggests, 20 year term life insurance offers coverage at a level premium for 20 years. This premium is determined by the insured’s age at policy issuance as well as what is determined in underwriting. Once the policy is issued, the premium cannot be raised by the company during the term. Like most other term policies, 20 year term life insurance can be renewed after the term expires, but at rates reflecting the insured’s current age and recalculated year to year. This invariably results in significantly higher premiums.
Like all other term policies, 20 year term life insurance is designed to be a temporary life insurance product. It is best utilized to cover additional life insurance needs the insured anticipates to have for the next 20 years. These needs can include such things as mortgage protection and college funding for children.
Since 20 year term life insurance is popular life insurance option, most life insurance companies offer it in some form. These companies include MetLife, The Hartford, Prudential, Mutual of Omaha, Genworth and various other national and regional companies.
Other Policy Options
Since term life insurance premiums are necessarily directly related to how long the term is, that is all things equal policies with shorter terms cost less than policies with longer terms, 20 year term life insurance represents a median option among term life insurance choices.
20 year term life insurance is also somewhat comparable to permanent life insurance policies such as whole and universal life. While both 20 year term and permanent policies provide long-term coverage at static premiums, by definition permanent policies are designed to provide coverage for the life of the insured. Permanent policies also feature cash value mechanisms, which term policies do not.
Options With 20 Year Term Life Insurance
Most companies offer a variety of optional amendments, or “riders” on 20 year term life insurance. These riders come at an additional charge, but often quite beneficial.
Perhaps the most common rider is the waiver of premium rider, which keeps the policy in force without further premium payments in the event the insured becomes permanently disabled during the policy term. The additional cost of a waiver of premium rider is often negligible, and many agents include it as part of their quote during the sales process.
The accelerated death benefit rider provides a portion of the death benefit while the insured is still alive if the insured is diagnosed with a terminal condition and given a certain amount of time to live, usually 12 months or less. This allows the insured to address anticipated final expenses before death. Once the insured dies the rest of the face value then becomes payable.
The guaranteed insurability rider allows the insured to purchase additional term life insurance coverage based on current age without having to undergo further underwriting. Although usually available only at certain times during the policy term, it can be quite beneficial for individuals who are diagnosed with health conditions which would otherwise severely rate them, or perhaps render them entirely uninsurable otherwise.
The return of premium rider, or ROP, allows the insured to recover all premiums paid dollar for dollar at the end of the term if he or she outlives the term. While the ROP rider is significantly more expensive than most other riders, a term policy with ROP is still less expensive than a comparable whole or universal life policy. It is often an attractive middle of the road option for those who want the return on investment a permanent life insurance policy can provide, but without permanent life insurance prices.
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