Insurance Hub

Many are wondering what is better between the two; whole life or term insurance. Well, I for one believed that term is useless, but I was wrong. The whole life insurance is not actually needed and can be a waste of time and money. Of course there are some cases that it may be a good policy, but mostly, people will benefit more on the term insurance.

One good case for getting whole life rather than term insurance is when there is a disabled child in the family that will need life long care. Once the parents die, the child might be left on their own. A whole life policy will ensure that this child gets the care they need throughout the rest of their life span. Though term insurance can do this, it is probably a better idea to get the policy that will be in effect until the day someone passes on. Even if arrangements have already been made, it might still be smart of have the added protection of this type of policy.

We all need term insurance because accidents happen. Even though we don’t invite accidents, the term insurance will be a big help when the time comes. It can pay for funeral services. In addition, the term policy can give a family some money in the event that a parent dies at an early age.

Term insurance can go for a few years or on up. Some policies are renewable as time goes on, but once the children have grown and a good retirement account has been established, it might not be necessary to keep the term insurance at all. This will be a judgment call of course, but it is not going to be the sole source of income if someone were to die early. Some who are of a charitable mind will have term life with the benefits going to charity until the day they marry or have children. Others find that they have a great policy at work, but they should remember this probably only covers death that happens on the clock. They need something more than that for their family.

Insurance in general is confusing and life insurance can be very confusing to understand due to all the provisions and riders.  So when carriers come out with multiple products with an array of provisions it can be overwhelming to decide which is best for your planning needs.

So let’s catch you up on the different types of term life insurance policies.  Being informed will help you be more comfortable with the product and more confident in your decision to purchase the plan for you or your family.

There are primarily four different types of term life policies available:

“ART” or Annual Renewable Term Life:
Or it is also called “yearly renewable term” or YRT and ART or “annually renewable term” 
This product simply provides protection for one year, then it renews the next year same face amount but the premiums increase with your attained age.This life insurance policy is typically used in planning for very short term needs.  Perhaps to cover a loan or some sort of business situation where an executive or key employee needs the coverage.

Guaranteed Level Term Life Insurance:
This product has a level death benefit that you choose at the time of application.  The premium is level as well but you need to be very careful here.Depending on the carrier some policies may be a 20 yr level term life but the premiums may adjust after an initial 10 yr guaranteed period.  Most carriers have guaranteed their level term life products for the whole term period, they have done this primarily due to competition.  Make sure you look at the carriers illustration ran on their own software.  There you will be able to verify if the premiums are guaranteed for the whole term period.

Decreasing Term Life:
This product is mostly non-existent anymore, due to that rates have become so competitive and affordable that level plans make more sense to buy.  You may have heard this product called Mortgage Term Life Insurance also, because it was marketed mostly to new homeowners after buying a home to cover the loss of the bread winner. This product would simply decrease in face amount and premiums over the years of keeping the policy in force. The goal would be that when your mortgage or loan was paid off your insurance would dissipate as well because there was no longer a need for coverage.In our view you should buy a level guaranteed plan, currently the rates are lower than ever and you will want a larger face amount most likely anyway if you qualify.

Return Of Premium Term Life:
This is one of the newer term plans that has been brought to market over the last few years.We really recommend this type of plan and it is extremely popular with consumers for these reasons.  Typically depending on the carrier you could purchase a 15 year, 20 year, 25 year or 30 year policy.  What happens is after you hold the policy typically for half of the time of your guarantee you would start building a return of your premium dollars.How it works is if you buy a 30yr rop plan and if you still own it after 15 years there would be a percentage of your premiums paid into the policy that you could walk away with.  Request that your broker or agent show you the carriers illustration where it shows you exactly how long you have to hold the policy and how much you would get back in your pocket.  Of course if you hold the policy to maturity you will get back 100% of your premium, not to bad heh. Only bad about these policies is that they are definitely more expensive that straight term life policies. The return of premium life plans are great if you can justify paying more now for the potential to get all your premium back down the road.

You are now armed with the basics of the different types of term life policies and plans.  As always ask a lot of questions and make sure you feel comfortable working with your broker and the carrier you select to insure your life.