Term insurance is very simple. You choose your term or number of years your policy guarantee will last. The most common are 10, 15, 20 or 30 year terms. If you have a 20 year term, that means your premium and death benefit are guaranteed to stay the same for 20 years as long as you make timely premium payments. After your term ends, the insurance does not stop, but the premium increases. Term insurance builds no cash value.
When your term insurance expires, you have 4 options:
- Cancel your coverage
Your insurance ends at this point.
- Keep paying the increasing premium
Most people don’t do this as the increases are cost prohibitive.
- Apply for a new policy
If you are generally healthy and under age 70 or so, this is what most people do.
- Convert your term policy
When you buy a term policy, make sure it has a conversion option at the end of the term. This allows you to convert some or all of the death benefit to a permanent policy with no medical underwriting. This is what most people do that are not healthy. The cost for conversion is always quite higher than your former premium.
If we had a crystal ball, we’d know to buy life insurance when we could get approved, closest to the day we died. But since we don’t know we plan for the unexpected. We don’t buy car insurance hoping we get into an accident, or home insurance and wait for our house to burn down so our insurance premiums will pay off. I would say if you paid a policy for 20 years and you are still alive, that’s the good news.
There is no waiting period for life insurance coverage to start. You are covered once you are approved and have paid the first premium. Coverage can also be active after you complete the application and exam, but this coverage is conditioned on you ultimately being approved.
An insurance company can only contest a death benefit in the first two years a policy is in force. This includes death by suicide. After two years, a policy is non-contestable.
There are general rules of thumb that say a person needs anywhere from 5 to 10 times their annual salary in life insurance. That’s a good benchmark, but ask yourself this question: if I died tomorrow, what do my spouse and/or dependents need immediate money for?
|Payoff a mortage:|
|Replace my lost income:|
|Payoff Other debt:|
Add them up and you will get a general idea how much life insurance you need.
Generally speaking, if you are healthy, you will get the best rates by taking an insurance exam.
This usually includes getting your blood drawn. With advances in underwriting technology however, many carriers today are taking new approaches to underwriting. They might interview you over the phone and determine if an exam is needed. We’ve seen many people lately have their exam waived, which is good news.
Most companies do not do a credit check.
At FindAterm, we do not have a favorite company.
After talking with you about your personal situation, and how much and what type of coverage to you need, we will match you up to the company we think will give you the best fit for the least money.
The best life insurance is a policy that is in-force on the day you die.