PERSONAL INSURANCE
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Term Life Insurance
The products of Life Insurance are important tools that are used to protect your financial security and well being of your family. These Life Insurance (Term Life Insurance) products are not for those who die, they are for those who live. They are meant to financially support your loved ones in the event of premature death, accident or illness.
Life insurance is a legal contract, which sets out three basic things:
- How much money the Life insurance company will pay to your loved ones if you die
- How much you will pay each month to get the Life insurance. This is called premium. The more insurance money your family gets, the higher your premium will be
- How long the Life insurance will cover you
Almost everybody. The only people who may not need it are those who have no debts and no one to depend on them for money. But even they should think about small life insurance that will cover final expenses.
Each type meets a different need and has a different cost. Learn more about each insurance type.
Term Life Insurance Plan – is temporary life insurance which provides coverage for a certain number of years for a specified premium. This plan is usually less expensive since it does not accumulate cash value and all premiums paid are used to cover the cost of insurance. The term may be 5, 10, 20 years or longer.
Term Life Insurance covers you for a set number of years. This is called the term. You can get a policy to a certain age, usually 75-85.
- Monthly premiums stay the same for a stated term and rise significantly for the next term.
- When the term ends, your insurance renews automatically, unless you take steps to stop it. In most cases, your policy simply continues for another term at a higher cost.
- You can convert a term plan to permanent plan but the premiums will be based on your age at the time of conversion.
- This policy pays cash to your loved ones only if you die before the term is up. The lump sum cash payment is called the death benefit. Your loved ones do not pay tax on the money they receive.
- If you cancel term policy before the term expires, all premiums paid are forfeited.
- Clients with limited budgets, for instance, young families with small children and big financial liabilities.
Sara, 28 years old and Ray, 31 years old are a young couple with two children Allen, 3 years old and Michel, 2 years old.
Ray is working as an engineer and makes $55,000 a year and Sara stays home with children. They have a nice house with mortgage of $320,000, two car leases and some credit cards debts. Their financial obligations are about $400,000 and they currently don’t have enough cash flow to pay for their permanent insurance. When Sara gets back to work and start making additional income they will convert their Term plan into Permanent. - Clients who need to cover a temporary insurance need, such as a mortgage, line of credit, loans, or other financial obligations.
Andrew, 42 years old and Maria, 40 years old are a married couple. They don’t have children or other dependents. They have a $200,000 mortgage which they will be paying off for the next 20 years. They have enough savings to cover their retirement expenses. $200,000 Term Life insurance for 20 years is the best fit for them. - Business owners who have taken business loans for a certain term.
Sergey took a construction loan for $400,000 for one year to build a house for sale. For this year he took also a Term life insurance for the same amount.
Permanent Life Insurance Plan provides you coverage for the lifetime. Depending on the type of a plan, permanent life insurance may generate a cash value and/or be paid up in a set number of years. These policies have higher initial premiums than term policies, but unlike term life insurance, you never have to renew, so your rates won't go up.
There are two types of permanent life insurance:
Whole Life Insurance - is a type of permanent insurance that provides coverage for your entire life and you will pay the same (level) premiums. You can pay up your policy in 10, 20 years or at age 65. This means that nevertheless that you will be paying premiums only for a certain period of time, you will be covered until age 100. Premiums for this type of insurance are initially higher than term insurance premiums, but in the long run, it can wind up costing you less. A whole life policy does not offer investment choices and produces very little cash values in the early years.
Universal Life Insurance Plan - is an extremely flexible form of permanent life insurance with potential tax-sheltered investment component inside the policy. It provides you coverage for the lifetime and caters to a wider range of needs and can include many options as well as tax-sheltered investment advantages.
- People who want to save for the future. If they let the cash value build up, they'll have more savings for their retirement, or to pass on to their loved ones. Your loved ones do not pay tax on the money they receive
- People looking for tax breaks on their savings. They don't pay tax on any money they make investing the cash value until they take it out of the account
- Would like to pay up their insurance fast
- Want guarantees
Guaranteed Issue Life Insurance is the simplest form of insurance. These plans have either no medical questionnaire or only a few simple eligibility questions, thus providing a solution for many people who would be turned down for the other products listed above. The benefits of a Guaranteed Issue product tend to be quite limited, so this plan is not always suited for someone who is eligible for a more traditional option.