Competitive term life insurance offers coverage for a very specific time period. Typically, such coverage is for one, five or ten years. At the conclusion of the term, the insured may exercise the option to renew their insurance policy or they may choose to amend the policy.
How Term Life Insurance Compares to Other Types of Life Insurance
Term life insurance is often considered to be the least expensive and simplest type of life insurance. This form of insurance offers pure protection, but not the option to build cash value. The only function of a term life insurance policy is to pay a specified lump sum to the designated beneficiary upon the death of the insured. The policy limit and death benefit are identical in this type of life insurance. Other types of life insurance provide a death benefit as well as cash value. The premiums for other types of life insurance are often larger than the premium for a term life insurance policy because along with purchasing insurance, the consumer is funding a savings account. Other common types of life insurance include whole life, variable life, universal life and universal variable life.
Whole life insurance is designed to provide a type of permanent protection while also building cash value. Various accounts are managed by the insurance company with this form of life insurance. Whole life insurance offers a fixed premium that will not increase during the lifetime of the insured provided the planned premium is paid. Variable life insurance also offers a form of permanent protection by paying a death benefit to the designated beneficiary while at the same time providing cash accumulation that is low-risk and tax-free. The insured also has the option of borrowing from their policy. Universal life insurance will also pay a death benefit and low-risk tax deferred cash accumulation options. One of the disadvantages to universal variable life insurance is that the insured must handle the management of the accounts. Additionally, this type of insurance is not typically suited well for small premium amounts due to the fact that the premium must cover both the cost of the insurance as well as the various accounts, such as stock, money market and bond funds.
In searching for competitive term life insurance, it is imperative to compare several different insurance providers in order to find the most competitive rates as well as the best terms. The rates for competitive term life insurance are typically based on a variety of different factors. These factors can include age as well as health, sex, smoking history and occupation. As a typical rule, women are largely able to find better rates on competitive term insurance policies than men. Non-smokers can also usually expect to obtain lower rates on term life insurance than individuals who smoke. Depending on the insurance provider, a medical exam may be required in order to obtain the most competitive rates for term life insurance. A medical examination may include a height and weight check as well as a vital signs check, blood and urine sample and a history of any other health issues. There are several key elements to consider regarding competitive term life insurance, including the fact that as insured grows older, the amount of the premium will continue to rise. In comparison to whole life insurance, the price of the policy is established for the entire policy life.
Advantages and Disadvantages
Competitive term life insurance does offer numerous advantages over other types of insurance. Perhaps one of the most prominent advantages this type of insurance offers over other options is the cost. Competitive term life insurance is usually less expensive than an equivalent whole life insurance policy. This is because term life insurance is specifically designed to provide protection against death. What this means is that in the event of the insured’s death, the beneficiaries will receive the proceeds from the life insurance policy. Additionally, term life insurance policy will only cover a predetermined time period. Consequently, insurance companies are usually able to plan specifically for the policy cost and can charge in accordance. In comparison, whole life insurance is designed to last for the life of the insured. Over time, whole life insurance continues to build cash value. For individuals who are on a tight budget it simply may not be financially feasible to pay more for a whole life insurance policy. In this regard, a competitive term life insurance policy can provide protection at a lower cost.
It is often for this reason that many investment experts prefer term life insurance over other options. A portion of the increased cost for whole life insurance is applied toward administrative costs and other expenses. Therefore, only a small portion of the amount paid is actually applied toward building interest for the insured. Theoretically, the insured could take the difference in cost between a whole life insurance policy and a term life insurance policy and invest that difference. Over the same time period it would then be possible for the insured to make a larger return on their investment. As a result, it would then be possible to make more money than the cash value of a whole life policy could ever provide.
While there are many advantages to term life insurance, there are also some disadvantages that should be taken into consideration. As previously mentioned, the cost of a term life insurance policy will continue to rise as the age of the insured increases. While it is often possible for a younger individual to obtain lower rates on competitive term life insurance, the rates for an older individual are naturally going to be higher. Furthermore, term life insurance often makes the option to renew available at the end of the established term. With that said, the renewal option usually includes a significant rate increase.
Typical Costs and Savings of Term Life Insurance
The cost of a term life insurance policy can vary greatly based upon numerous factors, including gender, age and smoking status. For a $250,000 term policy for a 30 year-old non-smoking male, the average cost would be between$175 and $250 per year. Rates for women would be slightly less while rates for smokers are typically twice to triple the rate of a non-smoker. By comparison, a whole life insurance policy for the same $250,000 in coverage could range between $1,200 and $2,000 per year, depending on individual factors, resulting in a significant savings. The typical savings available between term life insurance and whole life insurance is often at least several hundred dollars. It is important to keep in mind that the lowest rates for competitive term life insurance are usually available for younger consumers who are in good health and who do not smoke.
What to Look for in Competitive Term Life Insurance
When shopping for term life insurance consumers often have the opportunity to make a selection between various policies. Making a determination regarding which policy is best can sometimes be a challenge. In choosing between different types of policies, it is important to not just make a premium comparison. A comprehensive comparison should also involve analysing how the premium will increase over the course of the next five to ten years. Although it may at first appear as though there is a significant amount to be saved by selecting a less expensive policy upfront, those savings could be offset by more expensive premiums later on.
The availability of riders is another important factor to consider. For adequate coverage, it is important to select an insurer that offers a host of riders to meet individual needs. A rider is basically a type of additional benefit that can be added to the core life insurance policy. Riders usually incur an additional cost, although they do allow more flexibility. An accidental death benefit is one such common rider. With this type of rider an additional insurance benefit is paid in the event the insured dies due to an injury or accident. An accelerated death benefit rider offers the protection of receiving a portion of the total insurance amount in the event the insured is diagnosed with a disease that is considered to be life-shortening. Overall, the best competitive term life insurance policy will be one that offers the most customization.
Renewal is also of utmost importance when determining whether a term life insurance policy is right for your particular situation. It is a good idea to make it a point to select a policy that will allow you options regarding renewing for another type of policy at the end of the term so that you can exercise the flexibility to select a universal life policy or a whole life policy if you desire to do so.
Competitive term life insurance offers numerous advantages, perhaps the most significant of which is a low-cost premium. As such, this type of policy is often ideal for individuals on a limited budget who wish to provide coverage for a specified period of time, such as protecting a growing family.