Term Life Insurance -- As Easy As A-B-C

There are some things in life that will always be confusing.

Like why the same meals prepared at your children's friends' houses always taste better. Why you can run out of gas when the gauge still shows one-eighth full. Why a man can walk up the stairs and not see the pile of stuff waiting to be carried up with him.  Or why television networks continue to spin off mind-numbing reality show after reality show.

Term life insurance doesn't have to be one of them.

"Many people don't realize that term life insurance is one of the simplest forms of life insurance," says Todd Ewing, senior vice president, agency sales and operations, for InsWeb Corporation (www.insweb.com).  "With its emphasis on short-term, lifestyle-based needs, it's as appropriate for families with young children planning for college expenses as it is for those who'd like to ensure their mortgage is covered or allow for anticipated retirement living expenses.  

"Term life insurance is a remarkably cost-effective way to provide for the future," adds Ewing. "And because it is relatively inexpensive, particularly when compared to universal or whole life insurance, it frees up additional funds to be invested in mutual funds and other income-bearing vehicles."

Recent studies have indicated that more than 25 percent of American households lack any member with life insurance -- and, perhaps even more alarming, approximately 75 percent of those who do have policies have inadequate coverage for the stage of life they are in.  That's more reason than ever to take a close look both at where you are now, and where you intend to be down the road.

By definition, term life insurance provides financial protection and peace of mind for a specific time (term), allowing you to choose the coverage amount (anywhere from $100,000 to several million dollars) and length of the policy (10, 15, 20 or 30 years).  If you die before the term of your policy is over, your surviving spouse or beneficiary receives the face value. If the policy expires while you're still alive, it can be renewed at a higher rate, converted to a permanent or whole life plan, or cancelled entirely.

Some of the top reasons people purchase term life insurance is that it is:

A - Affordable

Unlike whole life insurance that can cost thousands of dollars a year, term life insurance premiums are typically in the hundreds.  For example, a healthy, nonsmoking 42-year-old male can get a 20-year, $250,000 term insurance policy for as little as $28 per month; those same terms included in a whole life policy could easily cost $100 per month.

B - Beneficial

Term life insurance offers much-needed peace of mind because it, in effect, replaces the lost income that the deceased would have otherwise provided for the surviving spouse or family. By preparing for the event of an unexpected loss of wages, parents can breathe easier knowing that their children's college and wedding expenses will be provided for, and homeowners can rest assured that their mortgage will be satisfied (assuming the term length and policy amount match the consumer's needs).  

C - Customized and Convertible

Being life stage-driven, term life policies can be tailored to each individual's unique family situation, income level and personal habits.  Some carriers may also allow term life policies to be converted to permanent or whole life insurance, without having to furnish evidence of insurability such as a medical exam.  

Ewing reports tremendous interest in the recently introduced "return on premium insurance" -- a term life policy that features a slightly higher premium, but reimburses you for your entire investment (not including substandard and/or rider charges) if you survive the term of your policy.  With Americans living longer, the 30-year option, in particular, can be an excellent tool for "budgeting" for any college, vacation or retirement expenses anticipated in your 50s or 60s.

Regardless of what type of term life insurance you buy, industry experts recommend you:

* Get enough coverage.  Especially given its inexpensive nature, a good rule of thumb is to purchase the amount of coverage equal to 10 times your annual gross income. You want to ensure that your debts will be paid, and dependents can continue to live in their current lifestyles.

* Buy when you're young and in good health.  Although surprisingly favorable policies can be obtained for those who have diabetes, sleep apnea and high blood pressure, premiums are lowest when you're less than 40 years of age and free of pre-existing medical conditions.  Premiums increase upon renewal as you age.

* Go with a strong, established company.  In the event that a payout is needed, you'll want the assurance that your insurance institution will "survive" as well.  Choose a financially strong, U.S.-based company that has at least an A or better rating from A.M. Best Rating Service, an organization that rates companies on their financial stability and ability to pay claims.

Check www.insweb.com for a quick and easy way to get affordable term life insurance quotes.

Copyright © 2005, ARA Content