Term life insurance is the most common type of life policy. It offers temporary life coverage, which is not considered permanent, but can be renewed or converted into permanent life policies if you become terminally ill or are injured outside of the insurance company’s policies’ coverage. With this in mind, there are many things you should do and understand before purchasing this type of policy. These tips will help you choose the best term life policy for your needs and protect your family from financial hardship when you die.
The first thing you need to know is that a term life policy is usually only for the period you have agreed upon as the coverage term. Once this term has expired, the policyholder is no longer covered under the policy. Many people purchase this type of insurance policy to cover themselves or their family until they are financially able to make a major life changing investment, such as a home, a new car, college education, etc. Some insurance companies offer conversion riders to a term life policy, which allows the policyholder to convert the policy into a whole life policy with virtually no out of pocket expenses.
If you choose to purchase a term life policy that offers a conversion rider, you will pay much less in premiums and investment fees than you would if you purchased a whole life policy that could cost thousands of dollars in fees and costs. One popular example of a conversion rider is the “put option” provided by some mutual funds. With a mutual fund put option, when you buy a certain amount of stocks or mutual funds, you are allowed to invest the amount in any mutual funds around the world that are designated as put options.
The second tip you need to know about term life policies is that once you reach the age of sixty-five, your policy will automatically become a permanent life insurance premiums increase. This is the most common reason seniors decide to cash out their term policy and purchase another term policy at the age of sixty-five. Once you reach the end of your term, your death benefits will increase dramatically; sometimes in excess of three hundred percent! This increase in your premiums for your death benefits, is one of the biggest concerns seniors have, because it can lead many retirees quickly to an expensive investment that they cannot get out of.
Another reason seniors may want to convert their term life policy is if they have a child who is still in high school. Let’s say your son or daughter has just started high school. He or she will most likely decide to quit school and enter the workforce immediately, leaving you as the sole income provider for your family. With a term life policy you can convert the policy into a permanent life insurance policy without increasing your beneficiary.
A third reason seniors may convert their term life policy, is if they are in poor health and feel that they would be unable to maintain their current lifestyle. Lets say you are overweight and begin to gain weight, your entire life coverage policy will increase due to your new obese status. You can convert this policy, into whole life coverage, and be covered throughout your lifetime! However, when you choose to convert, you must speak with your agent. Some insurance companies will cancel your entire life policy, if you are too obese.
Many people feel that they do not need to convert their term life policy, because they are in good health. In reality, if you are unhealthy it is much more cost effective to pay your medical bills in full, then to pay off your premiums and convert the policy. Term insurance premiums are based on how much risk you perceive yourself to be. If you choose to convert your policy, it is because you are better off financially, as opposed to just paying premiums every year.
Some people also choose to convert, because of the many things like special occasions. If a parent dies, the surviving spouse may decide to convert their term life insurance coverage. Perhaps there was a great loss of a loved one, and you wish you had made the choice to convert. Regardless, of why you choose to convert, make sure that you know all of the things that your current insurance policy doesn’t cover. Things like accidental death, terminal illness, and critical illness are things that you will want covered under your whole life policy, so that you can have peace of mind.