TERM INSURANCE

Description
A named insured (person insured) is insured for the policy death benefit/face value (amount of policy) which is paid to the beneficiaries (persons who receive the payout) in the event the named insured dies within the policy period (length of policy).

Policy Period
The most common policy period terms available are for 5, 10, 20 and 30 years.

Costs
Term insurance is usually less expensive than permanent insurance. The cost is fairly inexpensive at a younger age and then increases with age. Payment plans available usually include monthly, quarterly, and annually.

Options
Term insurance is usually Convertible in part or in whole to a permanent policy during the policy period. Some Term policies are Renewable. This means that at the end of the policy period, up to a certain age, usually with an exam, a policy owner can renew the policy for a more favorable price as compared to getting a new policy. Term insurance policies usually have a Level Death Benefit, which means the amount paid out in the event of a death remains the same.

An Example
John Doe is the insured with a 20 Year Guaranteed $150,000 Term Life Insurance Policy. The policy owner (one who is responsible for payments) and beneficiaries (one who receives the payout) is his wife Jane Joe. During the 20 years, Jane’s payment will remain the same. If John was to die and the policy premiums have been paid, Jane would receive $150,000. Once the 20 years is reached Jane, if available can reelect to renew the policy or the policy coverage ends. If the policy does not have a renewable provision, the coverage just ends. Now during the 20 years, if the convertible provision exists, Jane can convert the entire term insurance policy or part of it to a permanent insurance policy which would provide lifetime coverage.

PERMANENT INSURANCE

Description
Basically as long as the policy owner continues to pay the premium, or until the insured reaches the age of maturity (95 or 100), the policy coverage continues. Associated with a permanent policy is some form of cash value account where a portion of premiums paid are deposited.

Policy Period
There is no policy period. The policy will never be canceled based on the age or health of the insured. If the insured reaches the age of 95 or 100, the insurance company usually assumes the insured has reached the age of maturity. At that time the policy owner is paid the cash value of the policy and the policy is no longer in force.

Costs
Permanent insurance premiums are higher. This is because a part of each premium payment goes towards paying the cost of the death benefit and the remaining portion goes into a cash value account which may earn interest. Payment plans usually available include monthly, quarterly, and annually.

Options

Loans
The policy owner can usually take a loan up to a certain percentage of the funds available in the cash value account. If the named insured dies prior to the loan being paid back, the death benefit is reduced by the remaining balance before paying the beneficiaries.

Surrender
The policy owner has the right to surrender the policy and receive the funds in the cash value account. There may be surrender costs depending on how long the policy has been in force.

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Types of Permanent Insurance

Whole Life
The premium and face amount normally stay the same.

Universal Life
Flexible type of permanent insurance policy that was designed to meet changing needs of a client over time. Depending on the amount of cash value, a policy owner can adjust the payment amount and schedule to meet their needs.

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What's the Difference between Term Insurance and Permanent Insurance?

Term insurance is a policy where for a limited policy period, the policy owner makes premium payments, and if the named insured dies, the beneficiaries get paid the death benefit. When the policy period end date is reached, coverage ends. A term policy can usually be converted in part or in whole to a permanent policy.

Permanent insurance is a policy where for a lifetime policy period or until the age of maturity (95 or 100 years old), the policy owner makes premium payments, and if the named insured dies, the beneficiaries get paid the death benefit. The policy owner may have flexible premium payments depending on policy type and funds available in the cash value account. The policy owner can take a loan against the cash value account. The policy owner can surrender the policy and receive the funds in the cash value account subject to policy surrender terms. There are many other options available.

Life Insurance Uses

Below are some brief descriptions for the most common uses for Life Insurance. If you have a question and do not see what you are looking for, email us or give us a call Toll Free at 1-800-790-0889 and we will give you the details.

Mortgage Protection
Mortgage Protection is one of the most common uses of Life Insurance. A policy is put in place so that if the named insured dies, the beneficiaries will have enough money to pay off the mortgage. This prevents the beneficiaries from becoming financially burdened and losing the home. If you are considering Mortgage Protection, you may also want to consider getting some Income Replacement coverage. Use our Life Insurance Calculator to help determine your need.

Income Replacement
Income replacement is also one of the most common uses of Life Insurance. A policy is put in place to replace the insured's income for a specified period of time.

Burial Policy
A policy that is put in place to cover the costs associated with final expenses.

Juvenile, Child Policy
This policy has many different uses. In general, the policy is put in place to cover the costs of a death, ensure the child always has some sort of coverage, and if needed, the cash value account funds can be made available subject to the policy terms and conditions.

For example, some parents get a policy for their children to ensure they always have some sort of insurance in force. The biggest concern of parents is what happens if their child for some reason becomes uninsurable at a future date. The policy can also be used to fund a college education, early funeral expenses, funding a future home down payment, and much more...

Key Man (Keyman) Policy
This type of policy is used by businesses to ensure they have the necessary operating capital to continue to run their business and find a replacement in the event of the death of a key person in the business. In addition, companies may use this policy as an incentive to attract key employees.

Buy Sell Agreement
This type of policy is found in situations where a legal buy sell agreement has been established. The legal document describes what would happen to the business in the event of a partner’s death. In general, a Life Insurance policy would fund the necessary costs to buy out the share of the partner that died according to the terms of the buy sell agreement.

Business Life Insurance
This type of policy can be tailored to fit any business requirement. For example a sole proprietor may want to purchase an investment, where the funding source may require an insurance policy as collateral.

How Much Life Insurance Do I Need?

Basic Theory
Sometimes referred to as the Income Rule, simply take 10 times your annual salary to determine how much life insurance you will need.

More Thorough Theory
Sometimes referred to as the Income Plus Rule, simply take 8 times your annual salary, and then add on final expenses, education costs, mortgage, total debts, and other expenses to determine how much life insurance you will need.

Life Insurance Calculator
Our Life Insurance Calculator incorporates many of the basic need analysis techniques and can give you a good starting point to estimating your needs.

Meeting with a Life Insurance Specialist
For the best results, we recommend meeting with a Life Specialist.

Life Insurance Application Process

Getting the Quote
The quote is usually the first part of the process. A quote is just a quote and should be used to get a range of prices based on the company's rating tables. This is so you can look at an individual and say they are very healthy, but what really determines the premium is the medical information and test results.

Meeting with a Life Specialist
This is probably the most important part of the entire process and overlooked by most people. The Life Specialist is just that, a specialist. For example, would you expect to get a doctor's diagnosis through an 800 number. We believe the same should be true for protecting the assets, dreams and future of you and your family. The Life Specialist will be able to help you determine your needs and recommend the right type of insurance program. In addition, based on the questions they ask and review of the policy rating requirements, they should be able to give you a fairly accurate quote assuming all the test results are inline.

Filling Out the Application
The application is usually a set of yes and no questions. If a yes answer exists, usually a short description is asked for. The application usually takes about 20-30 minutes to complete.

Getting Temporary Insurance
Some companies may offer temporary insurance with a limited death benefit if the named insured meets certain criteria, a payment is collected by the Life Specialist, and the application is completed.

Medical Exam
The medical exam, usually paid for by the insurance company takes 20-30 minutes to complete. The medical personnel will come to your home, office or you can go to them. If you’re afraid of needles, in many cases, they can do a finger prick. Make sure to request it before hand so your Life Specialist can get it approved if available.

Depending on the death benefit being applied for, some insurance companies only require a pre-qualified Life Specialist to use a special mouth swab kit.

Insurance Company Underwriting Process
The process usually takes up to 30-60 days from the time the application is submitted to the time a policy is issued. Some delays arise from the mail delays, waiting on medical records, requests for additional information from client, and/or the amount of current new business in process.

Insurance Company Ratings
Each company has their own rating process, but the concept is usually based on a tiered system. Premiums are based on how a named insured is rated. The following table is a generic rate table

Available Payment Methods
Payments plans available usually include monthly, quarterly, and annually.