Term Life Insurance Learning Center

Types of Life Insurance

TermMonster compares term insurance to whole life insurance and explores the benefits of each.

5 Types of Term Insurance

TermMonster compares term life insurance to whole life insurance and explores the benefits of each.

Affordability of Term Insurance and the Economy

TermMonster addresses reasons why term insurance policy premiums have decreased.

Life Insurance Payments and Claims

TermMonster explains how life insurance claims are paid.

How Long am I Going to Live?

TermMonster demystifies the actuarial tables and science behind life expentancy.

Who needs Life Insurance?

If someone depends on you financially, you need life insurance. Life insurance provides cash to your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet important financial needs like living expenses, mortgage payments, and college savings. Currently, there is no income tax on life insurance benefits.

Most Americans need life insurance. If you died tomorrow, would your love ones have the money to pay your final expenses (funeral costs, medical bills, etc.)? Would they be able to meet ongoing living expenses such as the mortgage, transportation, healthcare, etc? Would your surviving spouse be able to pay for college or retire?

Life insurance helps make sure the people you care about will be provided for financially in your absense.

Many people purchase life insurance under the following circumstance:

• You are married

Most families depend on two incomes. If you died suddenly, your family's standard of living may be in jeopardy. Life insurance makes sure your plans for the future don't die when you do.

• You are a single parent

As a single parent, you're the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance. With so much responsibility resting on your shoulders, you need to make sure you have enough life insurance to safeguard your children's financial future.

• You are a work-at-home parent

Work-at-home parents make financial contributions to the family. The replacement value of childcare, transportation, cleaning, cooking, and other household activities is often severely underestimated. Some surveys estimate the value at over $40,000 per year. With life insurance, your family can preserve their quality of life.

• You are retired

Did you know that your heirs could be hit with a large estate tax payment after you die? Life insurance proceeds are generally income tax free and can be arranged to avoid probate. If your insurance program is properly structured, the proceeds from your life insurance policy won't add to your estate tax liability and provide an asset to protect your estate for the ones you love.

• You are a small business owner

Life insurance also protects your business. A life insurance policy can be structured to fund a "buy-sell" agreement ensuring the surviving business owners have the funds to buy the deceased owner's share of the company at a previously agreed upon price. The owners maintain the business and the family gets the money. To protect a business that relies on a key employee, "key person insurance" provides owners with the financial flexibility needed to hire a replacement.

• You are single

Some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn't want to pass on to family members. If you're in these types of situations, you should own life insurance to eliminate the financial burden caused by your premature death.

When to buy life insurance?

The best time to buy life insurance is when you can qualify for it and when you need it. To qualify for life insurance, you have to be healthy. You'll need life insurance for financial obligations that will survive you. Financial obligations include income for your spouse, burial expenses, mortgage, and education.

If you have a family history of disease, buy insurance with a guaranteed additional purchase option. This gives you the opportunity to purchase a higher coverage amount without having to requalify. Or, buy more insurance now, in anticipation of future financial obligations. If you get sick or cannot qualify for life insurance in the future, you're protected.

Most people think seriously about buying life insurance for the following reasons:

• Marriage (or Divorce)
• Birth of a child
• Adoption
• Health concerns (potentially limit your able to purchase coverage)
• Financial responsibility for a parent
• Loved one requiring long term care
• New home (mortgage protection coverage)
• College education funds
• Retirement funds for spouse
• Change in finances
• Funeral expenses

Buying Life Insurance Online

Faced with the hassle of finding an agent, a carrier, and a good deal, you're considering buying a term insurance policy online. You're not alone. Consumers are getting term insurance quotes and purchasing term insurance policies from the comfort of their own computers.

1. By using TermMonster’s online research tools, including free term life insurance quotes, you're scouring the entire marketplace.
2. Buying life insurance online reduces the time spent on the application process.
3. Applying online for life insurance at TermMonster is 100% secure and gives you greater flexibility to commit to a life insurance carrier or policy without getting hassled by agents. Requesting term insurance policy quotes is completley confidential - TermMonster does not share applicant information with marketers.

Types of Life Insurance

There are two main types of life insurance: Term and permanent.  Term insurance policy coverage is typically the least expensive. However, there are situations in which permanent life insurance coverage may be preferrable. 
Consider a term insurance policy if:

• You need life insurance for a specific period of time. Term insurance enables you to match the length of the term policy to the length of your need. For example, if you have young children and want to ensure there will be money available for college education, you might buy a 20-year term insurance policy. If you want life insurance to repay a mortgage due in 30 years, buy a 30 year term insurance policy.

• You need a large amount of life insurance, but have a limited budget. In general, term life insurance is cheaper per thousand than permanent life insurance. At the end of the term, coverage stops unless the policy is renewed and there is no cash savings component.

Consider permanent life insurance if:

• You need life insurance for as long as you live. A permanent life insurance policy pays a death benefit whether you die tomorrow or live to be 100.

• You want to accumulate a savings element that will grow on a tax-deferred basis and could be tapped for a variety of purposes. The savings element or cash value can be used to pay premiums or for other purposes of your choosing.

5 Main Types of Term Insurance

• Renewable
• Level
• Decreasing
• Convertible
•  Return of Premium

A Renewable Term Life Insurance policy continues in force for a specified time period or terms. Usually one or five-year increments. The policy and can be renewed without having to provide evidence of good health.

Level Term Life Insurance policies provide a fixed amount of coverage with premiums that remain stable over a certain time period, usually in five- to 10-year increments. Common durations for level term life insurance include:

• 10-year term
• 15-year term
• 20-year term
• 25-year term
• 30-year term

There are also life insurance policies that set the term to a specified age (usually 65).

With a Decreasing Term Life Insurance policy, the premiums remain level, and the amount of coverage decreases every year.

Convertible Term Life Insurance gives you the option to change to a permanent life insurance policy without a medical exam.

Return of Premium Life Insurance (ROP) generally require you to keep the policy in force for its full term or forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit); others will return both. You should expect to pay significantly higher premium for term life insurance policies with the ROP feature.

Affordability of Term Insurance and the Economy

Many carriers' term life insurance rates are near historic lows. In fact, term life insurance rates have fallen approximately 50% since 1995! That's a big drop, and a big savings. Four reasons caused term life insurance rates to drop:

1. Term Life Insurance Medical Exams : Today, life insurance companies obtain better information about you before offering you their preferred term life insurance rates. In the past, exams and blood tests were performed for only the larger face amounts and older ages. Now, virtually everyone must submit to a life insurance medical exam.
   
   
2. Term Life Insurance in the Digital Age: The Internet has made it possible for new term life insurance rates and life insurance products to make it to market instantly which increases competition among carriers. The instant a new term life insurance rate is introduced, the whole world can see it by going to TermMonster and requesting a term life insurance quote. Our technology continually scours the market for the lowest term insurance quotes to simplify your shopping experience.
   
   
3. Advances in Medical Care: People are living longer than ever before. Accordingly, term life insurance companies don't have to pay death benefits as soon. This cost savings have been passed on to consumers in the form of lower life insurance rates.
   
   
4. Stricter Health Criteria to Qualify for Term Life Insurance: New lower term life insurance rates require very exclusive health criteria to qualify. Some companies demand a set of health and lifestyle requirements that only a small percentage of term life insurance applicants will meet.

Term life insurance rates are so low right now that you should compare your existing term life insurance policy's rates, features, and guarantees to those currently available. Even if you bought your term life insurance policy as recently as 1 year ago, it's very likely you could find a new policy providing:

• the same death benefit at a lower cost
• the same death benefit at the same cost with a longer guaranteed rate
• more death benefit at the same cost
• more death benefit at less cost with a longer guarantee

5 Factors Will Heavily Influence Your Term Life Insurance Rates

1. Tobacco
   
   Smoking has a major influence on term life insurance rates. Smokers are at high risk for lung cancer and developing breathing disorders, which can lead to an early grave. Recent research on life insurance rates suggests a 35-year old male who smokes could save 51% on the cost of term life insurance if he were to quit smoking.
   
   
2. Medical Record
   
   If you’re sick or happen to have a terminal disease, it’s unlikely any company will offer you insurance. If rates are available, they’ll be high and will likely exclude the illness from your current condition. In the case of heart disease, you will get a policy but your premiums will be high.
   
   
3. Hereditary Diseases
   
   Susceptibility to illnesses passed down through family lines are penalized with higher premiums.
   
   
4. Occupation / Hobbies
   
   If you work in a dangerous profession or embrace dangerous hobbies, your term life insurance rates will be higher than normal.
   
   
5. Obesity
   
   Life insurance companies penalize overweight people by increasing insurance rates, as they are seen as being at a greater risk than those who eat a balanced diet and exercise regularly.

Life Insurance Payments and Claims

Once a life insurance claim is submitted, you must determine how the proceeds should be distributed. These options vary according to the policy and may include the following:

• Lump sum: You receive the entire death benefit in a single amount.
• Specific-income provision: The company pays you both principal and interest on a predetermined schedule.
• Life-income option: You receive a guaranteed income for life. The amount of income depends on the death benefit, your gender and your age at the time of the insured's death.
• Interest-income option: The company holds the proceeds and pays you interest on them. The death benefit remains intact and goes to a secondary beneficiary upon your death.

Actuarial tables: How long am I going to live?

In actuarial science, a life table shows, for a person at each age, the probability of death before their next birthday. From this starting point, a number of statistics can be derived:

• the probability of surviving any particular year of age
• remaining life expectancy for people at different ages
• the proportion of the original birth cohort still alive
• estimates of a cohort's longevity characteristics

Life tables are usually constructed separately for men and for women. Other characteristics can also be used to distinguish different risks, such as smoking-status, occupation, socio-economic class, and others. Each of these factors combine to determine the rates you get on your Term Life Insurance Quotes.

To lookup your life expectancy, please follow this link: http://www.ssa.gov/OACT/STATS/table4c6.html