Tag Archives: insurance

How to Find Low Cost Term Life

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Low Cost Term LifeIf you’re looking to learn about how and where to find low cost term life insurance, then read on.

Term life insurance is clearly the cheapest and most affordable life insurance available.

However, since life insurance is an investment you will want to spend your money wisely, so I’m going to give some valuable tips and advise on how to find low cost term life insurance.

 

Brief Overview of Term Life Insurance

Many people are under the misconception that term life insurance only covers you for a certain amount of years.  That’s not really quite right.  Term life insurance covers you for your entire life.  However, you buy it in packages of time such as 10, 20 or 30 years for example, and that is why is called term.

At the end of the term, you will have the opportunity to purchase another term, or even it to convert your policy to a permanent insurance policy such as whole life, universal life or variable life.

Some companies allow you to buy term insurance until a specific age such as 55 or 65 years of age.

Term life insurance is purchased with certain strategies which you should keep in mind.  Since it covers death benefits only, you can consider the reasons for buying term life to include:

  • Income replacement to cover the needs of your family.  You might only need or want a policy to last you until a certain age or a certain period in your life such as when the kids leave home or up to a certain age such when you plan to retire.
  • You might to use a term life policy to use in place of mortgage insurance to pay for your home.  By the way, using term life insurance in place or mortgage of life insurance tends to also be much cheaper.
  • You might buy the policy to cover debts or use as a form of coverage for your own personal business to cover expenses, debts and whatnot.
  • You might want to have just enough to cover your children’s education.

So, as you can see, your reasons for wanting low cost term life can vary considerably and is dependent on individual needs and reasons.

Tips on Finding Low Cost Term Life Insurance

There are many companies offering low cost term life insurance policies, so keep the following in mind to find the best deal and at the best rate.

  • Buy only from reputable life insurance companies that are financially stable.  Many non-insurance companies exist out there selling cheap low cost term life insurance but you want to be very wary of these companies.  The company may not financially last the life of the term you bought, or they may not be reputable in paying out their claims.  It is vital you have confidence in the company from whom you are buying the policy.
  • Remember that although it might appear to be cheaper to buy a shorter term at the moment, it will cost you a lot more to renew that same policy as you age because life insurance becomes expensive as you age.  If you need the term insurance for 20 years, then buy the policy for that period because the monthly or annual premiums will be the same for the life of the term.
  • It is also cheaper to pay an annual premium over a monthly premium so you can save some money.
  • If you are married, and you both want to carry a term life policy, it is cheaper to buy a joint policy than two separate policies.
  • Remember that life insurance is based on your health, your lifestyle habits and your family history.  You may not be able to change your family history, but you can change your lifestyle such as losing weight, quitting smoking and other changes that will give you a better rating and save you money.
  • Get multiple quotes to compare costs.  Use an online quote calculator such as you will find on my site to get a look at how companies compare in terms of costs.
  • Be careful about being drawn in to buy extra riders on your term life insurance as that can raise the costs significantly and you may not necessarily require these riders.
  • Don’t buy directly from an insurance company or an agent that only represents one or a couple of companies.  Always use an independent agent to help you find the best rates and coverage that suits your needs.  An independent agent can research dozens of companies and find you cheaper rates even if you have health concerns or are a little older.

Bottom Line

Low cost term life insurance is available and can be easily found, but like any investment of your hard earned money, you should take the time to do some careful research to ensure you are getting the best buy.

 

Whole Life vs Universal Life: Which is Right for Me?

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Do you need to know the difference between whole life insurance and universal life insurance?

In this primer, I will explain the differences between the two policies and outline some of the pros and cons of these 2 types of permanent life insurance policy options.

What whole life and universal life insurance share in common is that they both offer death benefits along with a cash value accumulation feature which grows on a tax deferred basis.

Whole Life vs. Universal Life Breakdown

However there are some fundamental and significant differences between the 2 types of policies. Let’s look at them in more detail.

Whole Life Insurance

Whole life insurance could be said to be an ideal product for someone who can pay a set premium for a good deal many years, but who lacks the know all or is not investment savvy.  You could also describe the cash accumulation feature as a fixed form of a savings plan.

For this reason whole life is generally is viewed as a less flexible form of permanent insurance than universal life.

Whole life plans vary considerably between life insurance companies.  These plans come with a variety of options and sub options to choose from so it is best to sit down with a knowledgeable independent insurance broker like myself to gain a better understanding of your needs to find the policy most suitable for your situation.

Basic Types of Whole Life Policies

With a whole life policy you have 2 essential options to choose from, and some insurance companies only offer one type of whole life policy, so be clear you understand your choices and what type the company is offering. This includes:

  • Participating Policy – A participating whole life policy generally costs more but allows you to participate and receive the payment of dividends. You participate in receiving the profits made by the insurance company. When the investments made by the company perform well, then your cash value accumulation feature performs well.
  • Non-Participating Whole Life Policy – Is considered a very inflexible form of whole life policy. You cannot make any alterations to the death benefits, the premiums and the cash surrender feature which are all predetermined.

Here are the basics:

  • Your premium is used towards 3 separate components of the policy.  The first goes towards the death benefits or mortality charge.  A second portion goes to the administration costs, and the final portion goes towards the cash accumulation or investment portion.
  • The premiums you pay are fixed and are for a pre-determined period of time such as 25 years for example.
  • The monthly, semi-annual or the annual amounts of the premiums you pay are mostly fixed and rarely flexible.
  • In the early years of your policy, the majority the premium is paid towards the death benefits and very little is paid toward the cash value accumulation feature.
  • The cash value accumulation, which could also be referred to as the investment return is directly dependent and affected by interest rates so when they are low, you earnings or dividends are significantly lower as well.
  • The manner in how the cash value accumulation feature is invested is determined strictly by the insurance company.  You have no say in the matter.

Pros of a Whole Life Policy

  • Suitable for a long term insurance policy.
  • Takes the worry out of your hands.
  • Premiums, death benefits and cash value accumulation are relatively fixed.

Cons of a Whole Policy

  • Options are few and policy standards are inflexible.
  • Insurance company does not disclose how it allots the amount of premium you pay.
  • No choice offered for cash value accumulation feature.
  • No premium options.

Universal Life

Universal Life Insurance is considered as a newer, but more flexible version of Whole Life insurance.  This type of policy is considered very suitable for individuals who have larger amounts of money to invest and are looking for a combination of life insurance features such as death benefits which can be combined with a tax shelter investment vehicle.

Universal life is also referred to as unbundled insurance. The policy delineates or separates how the administration, the death benefits and cash accumulation features are to be handled.  This type of policy has more direct involvement and participation of the policy holder who has a variety of options and choices to make.

Universal Life Insurance Basics

  • Provides disclosure on how your premiums are divided between death benefits, administration costs and cash value accumulation feature.
  • Premiums you pay are more flexible. You can opt to pay lower premiums in your earlier years and pay higher premiums later on, or visa versa. You can even opt to take a premium holiday.
  • Allows you to alter your Cost of Insurance (COI). You can choose between either level or an increasing cost of insurance.
  • Can vary your death benefit options so that they are fixed, increasing or decreasing over the life of the policy.
  • Allows you to choose your cash value accumulation investment options which can also be changed to suit the investment climate more suitably. You can choose from a savings account option, indexed based investments such as a GCI, or growth oriented equity funds.

Pros of Universal Life Insurance

  • Provides more disclosure on how your premiums are used.
  • Allows for more flexibility in how you pay your premiums.
  • Permits you to more actively participate in how your cash value premium investment is to be invested.

Cons of Universal Life

  • Have high surrender charges in early years of the policy.
  • Too many options for the uninitiated.
  • Can have a negative impact on your cash surrender value if you make a bad investment or neglect to keep track your investment options.

Bottom Line

Both types of these permanent life insurance policies have their good points and bad points depending on your particular circumstances.  It is always best to have discuss both types of policies with an independent insurance agent like myself to get the best detailed information available