Insurance World

Term life insurance is often called temporary life insurance. Term life insurance is purchased to cover some type of asset over a fixed period of time. Term life has much lower rates than permanent plans because of these shorter time periods. Level term insurance is purchased to cover short intermediate-term obligations. The time periods can be 5, 10, 15, and sometimes 20 years. Short term debt is often covered by a level term policy. Family budgets are full of short term debt obligations. Families buy automobiles, appliances, furniture, and many other household goods and are in debt for these items over a short period of time. When you purchase these items you are often approached to buy credit life insurance to cover these obligations. It would be less expensive for a family to purchase a level term policy or rider to cover this kind of short term debt.

Level term policies are better than credit life policies because the insured can choose the beneficiary. The credit company is often the beneficiary with credit life insurance and so the insured has no option in how to use the money at time of death. Level term policies are better buys to hedge against inflation. The decreasing term policy is a little less expensive but the coverage declines. The cost of goods and services never declines and so a level term policy will at least maintain its original face amount for the whole time period.

You may want to compare level term rates and decreasing term rates. The difference may not be that much and so level term insurance may be a better purchase in the long run. The best type of life insurance planning includes a base of permanent insurance for life time needs and additional forms of term insurance for temporary needs. Level term life insurance is an excellent option for short term or intermediate term debt obligation.

Deciding on the wrong life insurance plan might leave a family without financial resources at the worst possible time.

Choosing between term and universal life insurance plans can be confusing. Only with some research and planning can a responsible choice be made.

Do You Even Need Life Insurance?

Before deciding between term and universal coverage, consumers need to determine whether or not life insurance is actually needed.

When you come right down to it, it’s a matter of money — if death would cause a financial burden for the family, then life insurance is critical. Financial matters to be considered include funeral costs, college tuition, and all outstanding and upcoming debts. For single people without children or dependents, life insurance is really optional.

Once you’ve made the decision to buy life insurance, then it’s time to determine which kind of policy is right. This is when you need a reputable insurance agent, referred to you by someone you trust. The agent can help you deal with the details of the various benefits and costs of multiple policy types.

Term Life

Term life insurance policies are among the most flexible and economical types of life insurance coverage available. These policies are designed for those who want basic coverage for a set time period without a savings account built in. This means that there will be no return on the money paid into the policy over the years.

Premium rates for a term life policy vary with the policy. Policies are usually purchased for 10, 15, 20, 25 or 30-year periods, and they may be renewable. Apart from low rates, the variety of term periods is one of the most appealing features.

For instance, a couple with a child entering college who want to ensure that tuition will be paid for in the event of their death, can purchase a term life policy for just those years. There is no reason to purchase a lifetime policy for a short-term need. Term policies with increasing or decreasing coverage are also available.

A disadvantage of term life policies is the inconsistency of their rates. While premium rates start out very low, they usually rise as policyholders age. Also, policyholders who want to renew after the initial term has ended, may find the renewal fees prohibitive.

Universal Life Insurance

Universal life insurance policies will pay any necessary death benefits, but also provide policyholders with an additional tax-deferred savings account advantage. Generally these policies must be held for a minimum of 15 years before resulting in any return from the savings account. They provide policyholders with a stable long-term investment that can be borrowed against or cashed out.

The premium rates and coverage provided by universal life policies remain constant throughout the years. Premium rates tend to be higher than with other policies, largely due to agent commissions, but under some plans the rates drop as the policyholder ages and may even disappear altogether. Unless the policy lapses, there are no renewal fees to contend with.

While some financial experts argue that there are better investment options available for educated consumers, many recognize universal life policies as having sound investment benefits.