Life Insurance Basics & Advice; And Insurance Calculators
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Life Insurance Basics
There are two basic types of life insurance plans - either term or permanent plans or some combination of the two. Life insurers offer various forms of term plans and traditional life policies as well as "interest sensitive" products which have become more prevalent over the past few decades.
TERM INSURANCE. Term insurance provides protection for a specified period of time. This period could be as short as one year or provide coverage for a specific number of years such as 5, 10, 20 years or to a specified age as high as 80. Generally,
Renewable Term. Renewable term plans give you the right to renew for another period when a term ends, regardless of the state of your health. With each new term the premium is increased.
Convertible Term. Convertible term policies often permit you to exchange the policy for a permanent plan. You must exercise this option during the conversion period. If you convert within the prescribed period, you are not required to give any information about your health.
Level or Decreasing Term. Under a level term policy the face amount of the policy remains the same for the entire period. With decreasing term the face amount reduces over the period. The premium stays the same each year. Often such policies are sold as mortgage protection with the amount of insurance decreasing as the balance of the mortgage decreases. If the insured dies the proceeds of the policy can be used to pay off the mortgage.
Adjustable Premium. Traditionally, insurers have not had the right to change premiums after the policy is sold. Adjustable premium insurance, however, allows insurers to offer insurance at lower "current" premiums based upon less conservative assumptions with the right to change these premiums in the future. The premium, however, can never be more than the maximum guaranteed premiums stated in the policy.
PERMANENT INSURANCE
Permanent insurance is designed to provide coverage for your entire lifetime, unlike term which is for a specified period. To keep the premium rate level, the premium at the younger ages exceeds the actual cost of protection. This extra premium builds a reserve (cash value) which helps pay for the policy in later years as the cost of protection rises above the premium.
CalculatorPlus.com provides a variety of free online finance and insurance calculators, including Annuity calculator and Insurance calculator that can help you save and make informed insurance decisions.
TERM INSURANCE. Term insurance provides protection for a specified period of time. This period could be as short as one year or provide coverage for a specific number of years such as 5, 10, 20 years or to a specified age as high as 80. Generally,
- Policies are sold with various premium guarantees. The longer the guarantee, the higher the initial premium.
- If you die during the term period, the insurance company will pay the face amount of the policy to your beneficiary. If you live beyond the term period you had selected, no benefit is payable.
- As a rule, term policies offer a death benefit with no savings element or cash value.
- Premiums are locked in for the specified period of time under the policy terms.
- Premiums for term insurance are lower at the earlier ages, but term rates increase as you grow older.
- Term plans may be "convertible" to a permanent plan of insurance.
- If you do not pay the premium for your term insurance policy, it will generally lapse.
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Types of Term Insurance:Renewable Term. Renewable term plans give you the right to renew for another period when a term ends, regardless of the state of your health. With each new term the premium is increased.
Convertible Term. Convertible term policies often permit you to exchange the policy for a permanent plan. You must exercise this option during the conversion period. If you convert within the prescribed period, you are not required to give any information about your health.
Level or Decreasing Term. Under a level term policy the face amount of the policy remains the same for the entire period. With decreasing term the face amount reduces over the period. The premium stays the same each year. Often such policies are sold as mortgage protection with the amount of insurance decreasing as the balance of the mortgage decreases. If the insured dies the proceeds of the policy can be used to pay off the mortgage.
Adjustable Premium. Traditionally, insurers have not had the right to change premiums after the policy is sold. Adjustable premium insurance, however, allows insurers to offer insurance at lower "current" premiums based upon less conservative assumptions with the right to change these premiums in the future. The premium, however, can never be more than the maximum guaranteed premiums stated in the policy.
PERMANENT INSURANCE
Permanent insurance is designed to provide coverage for your entire lifetime, unlike term which is for a specified period. To keep the premium rate level, the premium at the younger ages exceeds the actual cost of protection. This extra premium builds a reserve (cash value) which helps pay for the policy in later years as the cost of protection rises above the premium.
CalculatorPlus.com provides a variety of free online finance and insurance calculators, including Annuity calculator and Insurance calculator that can help you save and make informed insurance decisions.