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Life insurance is a necessity for people whose spouses and/or other dependents rely on their incomes. Regardless of the type of insurance you decide to purchase, the payoff goes directly to your designated beneficiaries and is not taxed, so the beneficiaries receive the entire face value of the policy. The two most common types of life insurance are term life and whole life. Understanding the difference between the two can help make the decision about which is best for your situation easier.

Term life insurance is purchased to cover a specific time period, usually not more than 20 years. The premium is set when the policy is purchased and does not change for the length of the term. If the insured dies during the term covered by the policy, the beneficiary or beneficiaries receive payment for the amount of the policy. When the term expires, the policy is no longer in force, and the insured person will have to purchase a new policy.

Generally, applicants for term life have to undergo a medical exam to qualify for it.

The advantage of term life policy is that the premium is usually lower than for other life insurance products. The disadvantage is that term insurance does not increase in value over time, so the premium are simply an expense-it does not accrue to the benefit of the insured. One cannot, for instance, borrow against the value of term life insurance.

On the other hand, whole life insurance policies are issued to cover the entire life span of the insured. The premium for a whole life policy will be substantially higher than one for a term life insurance policy of the same value, but the policy does accrue value over time. If s/he needs cash at some future point, the insured can borrow against the value of the policy. If the borrowed funds are not paid back before the insured’s death, the dollar amount of the loan will be deducted from the face value of the policy and the balance will be paid to the beneficiary or beneficiaries.

Some of those who purchase whole life use it as one tool in their estate-planning arsenal, because the beneficiaries do not pay taxes on life insurance payoffs. If a person has considerable assets and wants to avoid having some of them tied up in probate or subject to estate taxes, whole life can be a useful option in attaining those goals.

Some companies offer term life policy that can be converted to whole life during the covered term. The premium will increase, but the insured is not obliged to take another round of medical tests to qualify for the insurance.

Most term life insurance policies give the owners of the policy the option to convert to permanent life insurance. Although, from our experience, most people buy term life insurance because it offers lower premiums. Often overlooked is one of its main advantage of being able to change your term life into a whole or universal life without bringing proof of insurability. Often the process of converting is very simple and only requires filling out a form.

What are some of the advantages of convertibility

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Save your approval rating – In other words, if, when you applied for term life, you had been approved for select non-tobacco rates, even if your health has turned for the worst or you now smoke, you can convert your term policy to a permanent life insurance (whole life or universal life) and retain the select non-tobacco rating.
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Some exclusions are excluded – Most new policy have a common two year exclusions such as suicide, built into the insurance policy. Let say you have a ten year term and after 8 years you decide that you need a longer policy. If you just re-apply then the two year exclusion period starts all over again. But if you convert your term life policy to a permanent plan of insurance then the exclusion is usually waived.
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Life settlement – An often forgotten important aspect of life insurance is life settlement. In short, life settlement is the ability to sell your insurance policies face amount to a third party. For example, let say you need ,000 cash ASAP and you own a 0,000 life insurance policy. So you call a life settlement company and they tell you that if you give them your life insurance policy, then they will give you ,000 cash! You say OK and everyone is happy. By the way, once they tale over your insurance policy, you no longer have to pay premiums but you loose full control of the policy. When you die, they get their ,000 back plus ,000 (total 0,000). If you have a non-convertible policy, it is going to be impossible to sell the policy to a life settlement company. Unless you only have six months or less to live in which case you would most likely not sell the policy. Beware, as life settlement payments may be taxable.
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Mortgage life insurance – when taking out a life insurance to cover a mortgage, few people think of universal life or whole life. After all, since the mortgage term is well defined, then it would seem that term life is all you would ever need. Wrong! Let say you are a 35 year old with a 30 year mortgage. You most likely will select a 20 or 30 year term life insurance plan to cover the mortgage loan ins case of death. Now, 10 years into your mortgage you develop diabetes (common these days). Times get tough, you need to refinance your house. So now you cancel you old mortgage and take out another 30 year mortgage. Problem is, your 20 to 30 year term plan is now too short. So you shop around and because you have a per-existing medical condition, rates are either high or no one will insure you. Fortunately, you discover that your existing, preferred approved, insurance policy is convertible. You call the insurance company and convert to a permanent life insurance plan that will not only cover the length of your new mortgage but any other subsequent mortgages. Case easily solved!
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You are unlikely to outlive your coverage – As we get older and seem less invincible, our thoughts about life insurance changes dramatically. The end of a term insurance policy (or rising rates) becomes much more of an issue. Irregardless of how you feel when you first started your term insurance plan, know that you may be one of those people who may have some remorse about selecting cheap term life. Again, make sure that your term policy, even if the cost is a bit higher, is convertible to a good permanent life insurance. Keep this in mind: one study showed that the percentage of TERM LIFE INSURANCE policies that pay out is around 1%!

Convert to what?

That is a very important question. The fact that your policy is convertible is great but if you can only convert to a lousy whole life policy with very high premiums and low cash value, then the option is practically useless. When you take out a term life insurance policy, make sure to ask your advisor to give you sample proposals of plans that your policy is convertible to. Your term insurance policy should be convertible to at least two types of permanent whole life or universal life insurance. The new plan should offer lifetime rate guarantees. If possible one plan should be a high cash value life insurance whole life or universal life. Note that the name of the plan is irrelevant, its function is.

Another option

Although not as good as the conversion option, another overlooked option is ROP term (Return of Premium term). ROP term life insurance is often selected because it seems to give you an incredible option. With most plan, at the end of the term (15, 20 or 30 years) you get back all of the premiums you paid over the term of the policy. Another aspect of many of these polices is what is called paid up insurance. In other words, if you decide to stop paying on your life insurance policy after, let say, 20 years, a portion of the face amount will be yours forever even though you are no longer making premium payments. That portion of face amount that is yours forever can vary greatly from company to company. Ask for a proposal and read your approved policy carefully. Because only a portion of your policy can be yours for life, ROP term is not as good of an option when it comes to convertibility.

We hope this helped you understand the importance of term life insurance convertibility option. As each case can be very specific, we highly recommend that you speak to at least two advisors before making a final decision. As we say in all of out articles ask, ask and ask more questions, Be well.

Term insurance is one form of financial protection that is both loved and despised. Some financial advisors advise that it is best to invest the difference between high-premium cash-value plans and low-premium term plans in capital-appreciation funds. Other advisors and even some clients view term insurance as a waste of money. Term plans refer to those that remain in force for a specific period and do not offer cash values. Some companies offer a variety of coverage periods and even refundable term options. The latter is of dubious value. However, the view that it is superfluous is somewhat misguided.

- Term Insurance

Adequate insurance coverage for low-income earners is a significant merit of term insurance.

The premium of cash-value plans may prove too great for those on the wrong end of the income ladder. The existence of these types of plans means that such persons do not have to go without insurance or remain underinsured. Those who may be rated because they belong to higher-risk groups can also benefit from the lower premiums. This option ensures that they can still afford financial protection when cash-value plans are prohibitively high. Even higher earners could enjoy more disposable income for savings and other needs.
- Term Insurance

Term plans are useful for covering short-term life insurance needs. Overall coverage may consist of long terms needs like estate preservation and also ephemeral needs like mortgage protection. This is ideal for coverage needs that have a span of twenty years or less. This allows people to get coverage tailored to specific needs that may arise from time to time.

Lower-premium plans can also help people cover other protection products and save for retirement. It is a fact that if you spend too much of your disposable income on one financial product, you may handicap your financial plan. If you spend too much on life insurance, there may be little left for other necessary financial products.

Another benefit of non-refundable term insurance plans is the absence of surrender charges. The fact that these can also lapse a lot easier than cash-value plans is a major demerit. However, term insurance not as much rubbish as some sales representatives would have you believe. For those who wouldn’t save otherwise, taking a cash-value plan may be a better option. Depending on your circumstances and needs, it can save you money and serve you better.

http://www.terminsurance.pannipa.com/2009/10/term-insurance-a-significant-life-insurance-alternative/

Turn on your television; you will be able to come across different companies that are there to offer their life insurances to people. And most probably, you have head about the term life insurance.

Without batting an eyelash, a person would know that this kind of insurance is very popular among people since you only have the need to spare a few dollars before you get insured. Because of this, this insurance is regarded as the simplest as well as the most reasonably priced life insurance there is.

So there, in just a few bucks, you will get the peace of mind that you’ve been dreading to have for your love ones. Even though you are taken away from them, you know that they will have the financial needs that they require in live. However even though this kind of insurance functions like the rest, there are still some critical information that you need to understand before you get one.

Above any kind of insurances out there, the term life insurance provides the largest death benefits for exchange of a few dollars.

If you are not convince, better try to compare this to other traditional kind of policy side by side so that you will see that it is really considerably cheaper. Because of its low rate, this will give people the chance to get larger coverage than what a person can afford to pay for in the permanent life insurance.

However, this will not cover a long period of time since their terms would normally revolve around 5, 10, 20, or 30 years. There are even times when a one year term life insurance exists. Another key point to understand is the fact that this does not accumulate cash value after a period of time like what happen with the universal or the whole life insurance.

Do people over 50 want a life insurance policy? I noted some figures on how people over 65 are covered today. Americans over 65 kept around four percent of life insurance by dollar amount, but that group of older people has 3/4 of the deaths. So why would an age group who is most likely to need to plan for their own deaths be an age group that also is not well insured? Here are a few reasons.

- Term Insurance

First, many of these people probably were insured at one point in their lives. They could have had a term life insurance policy that ended after a few decades They could have had coverage from a job, but lost it when they quit or retired Now, just when they are over 50 or 65 they may think that they have passed the age for getting life insurance.

Or they just have not thought about it, or they may think it will be too expensive for their budget. Because we are living longer and healthier lives, insurers are actually dropping premiums. In addition, many top life insurance companies are looking at the aging baby boomer market and selling policies to middle aged and older people.
- Term Insurance

Reasonably healthy people can find term life insurance well into their 70′s, while almost everybody can find a whole life policy until they are 80! Some whole life policies even accept 85 year olds! Reaching the golden years does not mean that a person’s obligations have ended. It also does not mean that people do not want to provide for their own final expenses and also give money to their loved ones. A life insurance policy for an older person can be an affordable way to deal with financial planning.

Many older people want to leave money for their own funerals. That is simple to do with a small final expense policy

http://www.terminsurance.pannipa.com/2009/10/over-50-life-insurance/

Basically, there are two types of life insurance policy which you can confidently insure your life, whole life and term life insurance. Term

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