Term life insurance is an insurance product that offers coverage on a specified term, usually for a limited period, the specified term. The coverage typically extends for an agreed period of years, as well as the lifetime of the account holder. The insured pays a premium to the insurance company at the beginning of the coverage and is then paid a monthly premium to maintain the policy. During the specified term, the premium amount is adjusted for inflationary factors and life changes. If a policyholder should die before the end of the coverage, at no cost to the policyholder, then the balance of the policy would go to the beneficiary.
A level-term life insurance policy offers the best option for most consumers. The best feature of a level-term life insurance policy is that there is no compulsory enrollment or increase in premiums. This means that if an individual purchases a level term life insurance policy when they are younger and do not need coverage that long, then there will be no increase in their premiums.
After purchasing a policy a person will often be required by their insurance company to purchase additional riders to their policy at an additional cost. Most people are familiar with the traditional riders such as emergency medical exams, accidental death, and loss of cover after the termination of employment, but many consumers may not be aware of the additional riders that are available. Some of these additional fees can increase the total cost of your policy dramatically.
One of the most commonly requested riders is the death benefit or benefit paid upon the death of the insured. Premiums are based on an assessment of the expected benefit, and these premiums are not refundable. The death benefit is intended to cover burial expenses and legal costs incurred during the life of the policy. While this is an optional benefit, it is strongly recommended that all applicants who purchase term life insurance pay this type of fee.
Another rider that can increase the cost of a policy is the guaranteed renewable term or GPT. The GPT is a period in which the insured person may choose to end the policy. This fee requires the policyholder to designate a specific date within the specified period. If the insured person dies before the designated date, the remaining portion of the premium is refunded to the beneficiary.
Many consumers are familiar with the term permanent insurance, also called permanent life insurance. This type of coverage is usually purchased in combination with term insurance. With permanent life insurance coverage, the policyholder makes a monthly premium payment that is then held for the life of the policy. The policyholder may borrow against the cash value of the policy, or take out a loan with the financial institution that provides the policyholder’s bank account. If a policyholder should die during the period for which the policy is in force, the cash value of the policy transfers to the beneficiary’s account. After the policy expires, the cash value of the policy is forfeit and no refunds are made.
Universal life insurance, or whole life insurance, is a hybrid of the above two types of insurance coverage. With universal life insurance, all of the financial obligations of the policyholder are transferred when he or she dies, regardless of whether or not the policyholder has made payments during the life expectancy of the policy. This ensures that the policyholder’s loved ones will not be burdened with high payments upon the policyholder’s death. Premiums on this type of policy are based on several factors, including the age at which the policy was purchased, whether the insured had owned a home during the period in which he or she was insured, and how much the insured had paid into his or her policy.
The above examples demonstrate that there are a variety of ways to purchase life insurance policy protection. There are advantages and disadvantages associated with each option, depending on what the buyer wants to accomplish. No matter which type of life insurance coverage someone chooses, they can rest assured that their families will be able to meet their financial obligations after their death-a necessity for any homeowner in today’s economy.