Best Term Life Insurance
How to Find the Best Term Life Insurance
Besides shopping around and comparing quotes from multiple insurance companies the most important factors to finding the best term life insurance are: 1) signing with a strong, reputable insurance provider, 2) buying young, 3) choosing the right variant of term policy, 4) choosing the lowest premium necessary to cover loss of income at death, and 5) avoiding non-guaranteed contracts. Each of these factors will be discussed at length, but the overarching theme when buying term life insurance is to accurately predict your financial situation at the end of the term, be it 5, 10, 20, or 30 years from now.
The Importance of Planning Ahead
Out of all available life insurance policy types, term is the most inflexible. On the one hand, this is a benefit because in the financial services industry flexibility always comes at a premium. On the other hand, as a result, unaware policyholders often miscalculate their financial future to the point where a more flexible, permanent policy would have been cheaper.
Term life insurance has the potential to save you a lot of money because it offers the lowest premiums per $1,000 of coverage. It's especially great for young investors who can accurately pin-point the length of time for which they need coverage and the coverage amount. If you want to saving the most money on life insurance, be sure to plan ahead — through the end of policy's term — and be realistic.
Finding the Best Insurance Companies
The insurance company takes your premium payments in exchange for a promise of compensation in the event of death. This promise is only as good as the company that makes it. More specifically, this promise is only as good as the assets backing the company's ability to meet its financial obligations. Nothing's worse than counting on this promising, paying for it year after year, only to be shrugged off when the need materializes. That's why the best term life insurance comes from a quality, stable insurance provider.
Many insurance companies were subjected to rating downgrades during the recent economic upset. That being the case, a few dozen brand names are still strong, and a handful are exceptionally well leveraged. To find a stable insurance carrier, see Life Insurance Company Ratings. Remember that the absolute lowest rates don't necessarily mean you're getting the best deal, as fledgling insurance companies might discount products to attract your business. And paying premiums to a company that won't be able to fulfil its obligations 20 years down the line is never worth it.
Term Life and Buying Young
Term life insurance rates are lowest for younger policyholders for the obvious reason that they are at lesser risk of death. As a result, term life is drastically more economical than permanent life policies when comparing for individuals in their 30's and 40's. But, as the individual ages, the economics become inverted. The key to winning with a term policy is being on the right side of this equation. If you are young, if you have a definite, short-term life insurance need, and you don't care about building capital, siding with term life will save you a lot of money. The less certain you are about the period of needed coverage or if you desire to maintain coverage into retirement, the more disadvantageous term life becomes.
The Right Type of Term Life Policy
Term life insurance is an umbrella product, with many sub-variants: renewable term life, level term life, decreasing term life, and return of premium term life being the most common. Each policy is slightly different features that will be more or less suited to individual objectives and aversions. Even so, regardless of type, the more accurately you can gage your future insurance needs, the better off you'll be. Once you're sure temporary (term) life insurance is right for you, be careful comparing rates across sub-variants, as each policy often has unique features that make apple-to-apple comparison difficult.
Renewable Term Life
This is a more-flexible form of term life that guarantees renewal upon the term's expiration. The policy has an expiration date, but it can be prolonged without charges or medical exams. Renewable term life is best for individuals that think they might need additional years of coverage or who worry about passing a second medical exam. Non-renewable forms of term insurance can leave you without a good way to get more coverage, at least without incurring rate hikes. Renewable term life has higher premiums than non-guaranteed life.
Level Term Life
Policyholders worried about continually-increasing annual premiums can opt for level term life, which averages out mortality charges for the time-span of coverage. This necessarily means higher up front premiums in return for lower premiums on the backend. If you want the convenience and stability of fixed premiums, or you are worried about being able to pay premiums in the second half of the term, level term life is a good remedy.
Decreasing Term Life
Generally, this is going to be the cheapest form of life insurance alongside non-guaranteed term life. That's because it offers little flexibility and a death benefit that falls every year. Decreasing term life leverages the death benefit to counter-balance rising mortality charges. As you age, premiums stay constant because they're paid for by lowering the amount at risk. A policy that starts at $1 million might end up at $500,000 when it expires. Decreasing term life has lower premiums than level term insurance.
Return of Premium Term Life
This form of term life insurance pays back all or a portion of the premiums made by the policyholder. This payout occurs at the end of the term even if you don't die. The catch is 20-30% higher overall premiums compared to ordinary term life, which allow the insurance company to use your payments to earn enough interest to cover mortality charges and overhead, back your premiums, and make a profit all at the same time. ROP life is best suited for policyholders who want to preserve capital in their life insurance but don't want to open a permanent policy like whole or universal life.
Avoiding Non-guaranteed Term Life
Shoppers looking for the absolute lowest rates will be tempted by non-guaranteed term life, but in most cases to their detriment. The lowest rates don't necessarily make for the best policy. Few people can predicate their future with the certainly needed to avoid the invisible costs that come with an inflexible insurance product. Consider paying a bit extra for renewal guarantees, level premiums, or an option to convert to a permanent policy. Look at the added expense as an additional level of insurance.
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