Why Is Term Life Insurance More Affordable Than Whole Life Insurance?

The two main types of life insurance-term life and whole life-are certainly at different levels. Term insurance is, as its name implies, only carried for a period of time (a “term”) prior to expiration. But a lot of people wonder why term life is so much cheaper than whole life (once they’re made aware of its existence, that is). Because of that lower cost, people wonder if it’s even worth purchasing.

That’s because they don’t understand why term life insurance is so much cheaper.

Basically, there are two main reasons that term life insurance is cheaper than whole life insurance. Below is a brief exploration of those reasons.

Term Insurance is Not an Investment

Whole life builds up a savings and investments over time – so in addition to the death benefit, there has been an investment and savings component as well, meaning that the insured can use that money for other things (such as paying part of the premiums over time).

But with term insurance, there is no investment portion – the plan is very simple – pay premiums and gets a death benefit if the insured dies prior to expiration of the policy term. However, if the term expires and the person passes away after that term, there is no payout. In most cases, the policy must be converted to either a whole life policy, or renewed at higher premiums for another term.

It’s better to think of term life insurance as a service provided rather than an investment-far more similar to insuring a car than anything else. Some (very few) policies do allow a partial payment of premiums that were paid in over the term, but most allow the policy to lapse or be converted.

This is one major reason that term life insurance is more affordable than whole life-the insurer has less involvement, and, less risk.

Lower Risks with Term Life

The shortest terms are going to be the least expensive, because the risk involved for the insurer is far less than with a long term or whole life policy. In other words, a person who purchases a 5 or 10 year term insurance policy will be at a lower risk to pass away than a person who purchases a very long term policy or a permanent policy. Whenever the insurer has a greater likelihood of having to pay out, the higher the premiums will be, in order to protect the insurer’s interests.

Additionally, the risks involved with carrying an investment and savings component drive up the costs of whole life policies as there are more costs on the part of the insurers-and, when there are more tasks to complete, the greater the cost-which is passed on to the insured.

Essentially, term life insurance tends to be less expensive than whole life insurance due to its simplicity. It does not carry the investment risks and payouts of a whole life policy, but provides for a beneficiary or beneficiaries should the need arise.

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Info on Term Life Insurance Quotes

Term Life Insurance

The number of people going for life insurance quotes has increased tremendously over the last few years. This has been attributed to the increase in the number of calamities and natural disasters such as the earthquakes and hurricanes that have made so many people to realize that life can be lost any time and not necessarily at old age as was the case previously. Besides, term life insurance applies to just about everyone and they are temporary. Moreover, unlike the insurance that comes with benefits, term insurance does not offer any benefits and does not act as a form in investment.

It is important that every person who intends to take a term insurance policy understands the different types of quotes under this category before signing up. Even then, some of the information that you will be required to submit is standard for all they different types of term insurance quotes. This includes your height, age, weight, lifestyle as well as your medical history. In order to get a term insurance quote, you do not need to visit the offices of the insurance policy provider as you can simply get these online. These do not also need the help of an agent or a customer service representative.

Some of the term insurance quote options that you may opt for include the level term, return of premium insurance, adjustable life, convertible life and renewable life. The level term policy offers rates that are fixed and is usually determined by the health as well as age of the individual applying. This type of insurance is common for individuals whose age is between 5 and 30 years after which it must be renewed at a higher rate as the risk of death is perceived to have increased. The return of premium insurance on the other hand pays all the premiums after the period under cover elapses even though without any interest. This makes the return of premium insurance essentially free. However, the catch is that this option is quite costly compared to the others.

The adjustable life policy is another form of term life that gives the policy holder the liberty to change the value of death benefits well as premiums. This may be prompted by changes in life that include growth and development of children among others. The other type of term insurance is the convertible term that allows the person who is insured to upgrade their term policy to whole life policy within the policy period. It is argued that the person may be able to cater for whole life insurance in the course of the term life period. The renewable term is on the other hand gives room for renewal of the policy but for a higher premium. That advantage with this is that the application process is not repeated. In summary, regardless of your needs you can always find term life insurance quotes that are tailored to meet your needs. Moreover, if you are hoping to upgrade you can also find an option that will allow you to do so when the right time comes.

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Find Out The Benefits Of Term Life Insurance

What is term life insurance? Life insurance generally falls into two classifications, permanent or whole insurance that lasts your entire life so long as you are current in the premium, and insurance that only covers you for a specific period of time. Insurance that only covers you for just a specific period of time is known as term life insurance. It is only good for a particular amount of time, known, unsurprisingly, as being the term. Some people usually go with a term of between five and 40 years for your coverage. You will be making premium payments during that time, and when you die during the term, your beneficiaries get the payout. However, in case you outlive the term, you no longer have coverage and you have paid all of those premiums for nothing. Listed here are a few of the advantages in picking term life insurance to suit your needs and also your own family.

The first advantage is term insurance is considered the most inexpensive insurance available in the market. The cost is stable in order to help people who can’t afford the raising insurance cost in the United States. With term, you can buy the amount of insurance that you need without having to pay a lot more than you’ll be able to afford. This is especially true when you are young and wish significant amount of insurance to protect your family. Often a term life policy can cost you hundreds of dollars annually but a similar whole life insurance policy can cost as much as thousands. In fact there are some term life insurance policies that may cover you to the value of $100,000 over the ten year term that cost less than ten dollars monthly. Obviously, similar factors are taking into consideration when applying for term insurance as they are when trying to get whole life; factors such as health, family history, lifestyle and age.

Another excellent advantage is term life insurance has flexible time period, meaning you are able to choose to get insured for a certain period of time for example, 10, 20, or 30 years. This is an ideal solution if you need temporary coverage. The policy could be renewed at the term ends until age 95. It can also be changed into a permanent policy and in most cases despite the health of the insured. After the selected term of coverage, premium generally will increase annually.

The third advantage can be to protect a spouse from losing a home in case the major wage earner is out of the picture. The actual quantity of coverage can certainly be fixed to sufficient enough figures to cover the cost of the home or can be earmarked to pay a certain amount to the remaining principal. Once your home is covered by term insurance you can also consider your children’s higher education. Children’s higher education is another reason behind term life insurance coverage. Without a father’s income contribution, college education may not be possible without term life, and short-term debts might not be met either for automobile to transport kids back and forth from college.

Now, are you presently convinced to purchase term life insurance? Well, in case you are that’s great! If no, perhaps you can get in touch with an insurance agent to answer all of your questions and concerns regarding term life insurance. You will find a listing of reliable and respectable insurance company online.

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Term Life Insurance Companies, Their Ratings And More

There are countless term insurance life insurance companies. As someone who’s been a life insurance professional for more than 20 years, I can honestly say that the best term life insurance companies, the top rated term life insurance companies, and the best rated term life insurance companies are very similar. It’s not to say they are all exactly alike but they are usually similar. To compare term life insurance companies is really a matter of what’s important to prospective insurance client.

Your priority

My experience has been that what most people are concerned with when it comes to term insurance is what it will cost them.

Clearly some term life insurance companies are more highly rated by companies such as A.M. Best, Moody’s, and Standard & Poor.

Some of the factors that determine a company’s rating are:

Financial strength
Financial stability
Ability to pay claims
Claims paying expediency

If any of these factors, among the others that are used, are important to you when you compare term life insurance companies, how important are these factors to you in comparison to price?

What if one company is considered one of the best term life insurance companies in the industry but the premium cost is double that for the same amount of coverage by one that is not considered one of the best rated term life insurance companies?

What’s your priority?

Ratings

Similar to being in school, term life insurance companies and all insurance companies are rated on an A-F basis.

Seems easy to understand, right?

Did you know that and “A” rated company can be rated anywhere from A++ to A-?

Did you know that different ratings companies, including those mentioned above use different criteria to determine ratings?

Did you know that an insurance company can be rated differently by the different ratings companies?

If an insurer receives a favorable rating from one rating company and a less favorable one from another rating company, which one do you think they’re going to make sure you’re aware of?

Underwriting

Insurance companies use the term underwriting to determine who pays how much for what. Different companies have different underwriting guidelines. Its name literally means that someone in the company places a signature on the policy saying a particular person meets the company’s underwriting guidelines.

There are three main methods used for underwriting life insurance policies:

Fully underwritten-most common-may involve medical exam (blood/urine specimen/attending physician statement).
Simplified issue-less common-no medical exam-decision regarding issue usually swift
Guaranteed issue-anyone who applies and meets certain conditions is guaranteed that a policy will be issued-(includes accidental death insurance and graded death benefit policies)

There are also different underwriting classifications. The most common:

Preferred-best rates
Standard-most common
Sub-standard, also known as rated or table

Some companies subdivide the classifications. For example:

Super preferred
Ultra preferred
Standard plus

Table can be in the form of a number (usually 1-6) or a letter (usually A-G) – the higher the number or letter, the higher the premium.

Convertibility

Some companies allow for conversion of a term policy to a permanent policy at a later date without proving insurability.

Other companies allow for conversion but require proof of insurability.

Some companies do not offer convertibility at all.

If convertibility is offered, it is often within certain time limits.

If you’re sure you want term and nothing else, then this is not something you need to consider.

Price

The main factors that affect price:

1. Health

2. Age

3. Life style

They are numbered as such because that is generally the order of priority companies use to classify prospective clients.

Poor health can and will exclude someone regardless of age and lifestyle and no amount of money will buy insurance. On the other hand excellent health can go a long way in reducing premiums.

A person’s age is the next factor. The age is compared to mortality rates. Different companies have different charts for mortality rates.

Another way to describe mortality rate is how many years someone of their age is away from death.

Statistically speaking, insurance companies know pretty accurately how many people of a certain age will die before their next birthday.

Life style is the third factor. The most common consideration is whether someone smokes but there are others as well, such as what someone does for a living. Certain professions are more hazardous than others.

A person’s hobbies have an effect as well. Sky diving, and speed racing are often frowned upon, and may not result in denial of coverage, but could result in higher premiums.

Regardless of all factors, female rates are nearly always lower than male rates.

Fully underwritten vs. simplified issue vs. guaranteed issue

All things being equal, fully underwritten is going to result in the best priced premium. However, often times all things are not equal.

Are you sure your health is as good as you think it is or is it possible a blood/urine sample, saliva swab, or doctor’s report could reveal something you’re not aware of, or if you’re not the most ethical person, perhaps something you simply don’t want to reveal?

A fully underwritten policy takes much more into consideration when determining rating class and price than a simplified issue policy.

Depending on your point of view, that can be an advantage or a disadvantage.

Assuming you’re being honest and there’s not already information reported about you to the medical information bureau (MIB), your chances of a policy being issued as applied for are as high as 9 out of 10 if you apply for a simplified issue policy.

On the other hand, there is about a 60% chance you will not qualify for a fully underwritten policy as applied for.

A guaranteed issue policy will definitely be issued. You will know if you qualify before actually signing the application. It’s either yes or no. However because it’s guaranteed, the price is usually much higher, unless it is a conditional policy such as an accidental death policy.

Conclusion

Unless you know the ropes and/or can take the time to weigh all the factors when comparing term life insurance companies, an experienced professional can steer you the best term life insurance companies for you to consider.

Having said that, if you want to be absolutely sure that you’ll get the insurance you want, it’s best to buy a guaranteed issue policy.

If you’re pretty sure you’re in good health but don’t want to go to the trouble of a medical exam or paramedical exam (blood/urine), or you don’t want to reveal certain matters that could affect your ability to obtain insurance, you should consider a simplified issue policy.

Once you qualify for a policy, assuming no fraud is involved, the only one who can cancel the policy once it’s been issued is you. The insurance company cannot cancel you as long as the premiums are paid.

Perhaps it makes sense to apply for a guaranteed or simplified issue policy first. Once issued then shop for the best price and/or the best rated term life insurance companies.

What’s best for you?

I invite any and all questions and comments.

Bob is a retirement planning and safe money professional who specializes in life insurance products and who has more than 20 years experience.

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Zeroing In On The Right Term Life Insurance Quotes

Your life insurance holds possibilities for securing the financial future of your dependents after your death. This is what makes it such a potent tool of investment which must be planned properly to get the right results at the right moment. You can check for relevant factors when looking for the right policy for your needs. It is possible to assess your needs intelligently and choose your life insurance policy accordingly to make sure that your policy yields proper benefits after your death.

You can go in for life term insurance if you are looking for short-term investments or opt for whole life insurance which is suitable for long term insurance investment. This is because term insurance is valid for a term duration which varies from one year to 5, 10, 15, 20, or even 30 year term duration. However, whole life insurance is valid for the lifetime of the insured and there are additional benefits like cash value which are not available in term life. There are several factors which you need to consider while choosing from term life and whole life option.

Whole life insurance is something which offers you worry free insurance coverage because it does not include any limited term duration. It also offers additional cash value which is accumulated from excess of amount paid in form of premiums in whole life insurance. You have to pay higher insurance rates in whole life insurance when you have to pay lower insurance rates in term life option. By comparison, term life scores over whole life insurance due to its simpler structure.

You can look for life insurance online options to suit your insurance needs. You can ask insurers for competitive quotes on their websites or approach an online insurance broker. An online insurance broker approaches leading insurers on your behalf and collects competitive quotes base don your needs. It is also important that you keep an eye on the reliability of the insurance company from which you are buying insurance. It is important because if you have settlement issues at the outcome of the policy then your policy may not be worth it.

It is possible to look for market ratings of your insurance company which is a reflection of the worth of the firm. It depends on the market performance and capital worth of the company. Standard accreditation agencies assign these market ratings to firms based on these factors. You can also look for web reviews of insurance company that you are looking to buy insurance from. Once you are sure of the reliability of the firm, you can start working on your underwriting profile.

This underwriting profile can pave your way to get better insurance benefits on your policy. It is possible to look for expert help to work on your underwriting profile. Your underwriting profile should be in keeping with the underwriting guidelines of your insurer. This would help you improve insurance benefits on your policy. Your life expectancy is also a key factor in getting lower insurance rates on your policy. Cheap life insurance is easily available if you have a higher life expectancy. The better your life expectancy lower are the insurance rates on your policy.

Your life expectancy depends on health condition and age at the time of buying policy. If you are young enough at the time of buying policy, you can get lower insurance rates due to higher life expectancy. It is also important that you have a good health condition to ensure no problems in getting higher insurance benefits on your policy. Your lifestyle issue also play an important role in deciding your life expectancy. Smoking is also a lifestyle issue which can mar your insurance benefits to a great extent.

If you quit smoking, your life expectancy would go up and insurance rates would come down which if good for your insurance policy. You need to keep these factors in mind when looking for competitive term life insurance quotes. There are various ways of getting insurance quotes. However, choosing right insurance quotes requires you to be careful in your planning. Your nature of occupation is also important because it can increase your life expectancy or decrease it based on how much you are exposed to physical hazards at work.

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