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Additional Details
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MotherNature | What exactly is term life insurance? |
in details please..but i hear you can cash it in..what does that mean...i know what it mean mean...but like what does it mean when it comes to..are you going to owe them something if you cash it in..basically what is the whole process of term life...i dont want to waste money on insurance |
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Messett
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A term life insurance policy is a contract between you and the insurance company where if you die during the contract term they will pay your beneficiary the amount specified in the contract. This is pure insurance and there is no account or cash value.
For example: If you purchase a 30 year TERM policy for 1 Million dollars then the insurance company will pay your beneficiary $1 Million dollars, tax free if you die in the next 30 years. Some term policies offer conversion options without underwriting should you want to extend your insurance beyond the original term. You would be converting into one of the policies I mention below.
Term insurance is the cheapest option and the shorter the term the lower the premium. You may have heard the people say "buy term and invest the difference".
Some term policies offer a "return of premium" rider. This option usually increases the premium 30-40% (ballpark). If you survive the term of the policy they will refund the premium you paid. These policies do accumulate a small account value.
Universal and Whole Life Insurance Policies are the ones that accumulate a cash value. Whole life policies are the most expensive because they are guaranteed to be in force until age 100. Universal policies may or may not be in force until age 100. If it doesn't say guaranteed to age 100 then it isn't guaranteed.
The account value of these policies grows over time and you can then either withdraw cash or borrow against it. if you take the money out it may be subject to taxes. If you borrow it there are no tax implications as long as you don't lapse the policy.
Life insurance policies are not the best investment vehicles, but because of the tax benefits they can be a good alternative depending on your tax bracket.
Agents will most often try to sell you a Universal Life policy. This is because the premiums are higher than term and the commission is that much better.
I tend to recommend guaranteed level premium 20-30 year term policies with convertibility options (just in case). You should only consider companies rated A- or better. I find the best rates come from American General, First Colony, Genworth, Met-Life, West Coast Life, and Prudential.
"A wife doesn't know the value of a life insurance policy...but a widow does." |
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danason1
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Term Life insurance is a policy that will cover you for a set period of time. It is pure insurance and will only pay out for death that occours within the term of the policy. It has no cash value or borrowing features. This is the cheapest form of life insurance that will pay out on any type of death accidental, medical, murder, natural causes, or in some states even suicide. Accidental death and dismemberment insurance can be cheaper but will only pay out for an accidental death.
You should purchase at least eight to ten times your income in term insurance coverage if you have a spouse or children that are dependent on your income. This will allow your family to invest the benifits and with sufficient coverage live off of the interest of the money effectivly replacing your income. No amount of insurance will replace your loved one but it will sure make it a lot easier.
Avoid five and ten year renuable term policies because you will basically be charged more money at your attained age of renewal. Get a policy that can cover you for at least ten to thirty five years. That will give you enough time to invest money and provide a liquid inheritence for your family if you outlive you term, you will need money in retirement anyway.
Make sure the insurance is a level term policy, that means that you will pay the same amount of premium every year for the life of the policy. Do business with a company that will allow you to cover your whole family mom,dad, and children for one price.
Avoid any insurance that has borrowing or investment features for one price. The coverage amounts will be very low and preium amounts very high for any cash value insurance. Some will even match term insurance rates but the trick is you have term insurance for a while and then it turns into a cash value policy and intrest off the money you paid into the policy is actually paying for the rest of the premium.
Cash value policies will not actually have a "cash value" until three to five years. The intrest is usually 1-3%, and when you borrow "your own money" you must pay it back at 6-8%, the agents usually make comissions on these products for three to five years and most of these agents have term insurance on their family anyway. You will pay too much money for too little coverage if you are tricked into buying a cash value policy.
Cash value life insurance is also known as "WHOLE LIFE" "UNIVERSAL LIFE" "VARIABLE LIFE" |
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teetee
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insurance paid to named beneficiaries when the insured person dies |
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Hadley
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Term life insurance offers you the maximum amount of insurance protection at the most affordable rates.
Term insurance that you can cash-in may be referred to as Return of Premium term life insurance. You buy a policy for a term period - maybe 10 or 20 years. If you outlive the policy term, you receive your premiums paid back, less any expenses the company keeps. However, premiums for return of premium term life insurance are usually much higher than level term life insurance.
Term life insurance comes in several term options - 1, 5, 10, 15, 20 or 30 years.
Rates can be guaranteed (level term) for the term of the policy, or they can increase (annual renewable term).
There are several types of term insurance including level term, annual renewwable ter, decreasing term, and return of premium term life insurance.
If you choose to cancel your policy with term insurance, you usually get nothing back. Since term insurance does not build cash value within the policy. However, as mentioned, if you buy return of premium term life and outlive the policy term, you get your premiums back.
The long and short of it is that level term life insurance offers you maximum life insurance protection at probably the lowest rates available to you - especially at a young age.
Learn more about term life insurance at http://www.term-life-online.com/term-life-insurance-guide.html |
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yooperpooper
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term life insurance has no cash value, you pay a lower amount to be covered in the event of death only. Whole life, ius bot a savings account and has a death "benefit". It builds cash value but then it a;so costs more.
I have both, a large term to cover the family if i kick off while i still have earning power, and a smaller whole life to bolster retirement. |
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Kenneth H
 |
Pure term insurance is like your car insurance if you don't use it in the period covered the money is gone. There are some products called term insurance that are actually a blend of whole life and term insurance.
Cashing in refers to whole life insurance. As you pay premiums part of the payment is put aside and builds value over the live of the insurance plan. Before death meeting certain term the isurance has a cash value that can be taken of borrowed against. It all depends on your policy and it's terms. |
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Black Fedora
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Term life insurance generally (there may be some product called term that has a cash value) has no cash value. It simply pays if the policyholder dies within the term (time period) of the contract. |
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insuranceguytx
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Go talk to a license professional (or several pros). No one on this message board can give you the best answer as to what type and what amount of insurance you need unless you want to post all of you personal financial information here.
As far as wasting money on insurance, your life is filled with many different types of risk. You can go through life without insurance and if and when something happens, you can recover financially, from that event on your own or you can transfer the financial consequences of that event to an insurance company by purchasing various insurance policies. Owning or not owning insurance does not change the risk in your life. Owning an auto insurance policy does not cause someone to have an accident nor does it prevent an accident. It reduces the financial consequences. |
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Doing the Right Thing
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To make it simple, term life insurance is like buying car insurance. You are paying premiums to be covered. If you stop paying, you won't be covered anymore.
There are different levels of term. They are: 10 year, 15 year, 20 year, 25 year, and 30 year Term. Most people buy 20 to 30 year term and invest the difference in mutual funds. When term expires, you should look at your investment and see where it is at. Then you need to ask yourself, do I still need life insurance or need as much coverage? You do not need to prove that you are insurable if you renew your term.
Most companies will sell you 10 year term because its the cheapest. And then 10 years later, when it expires, they going to play tricks on your mind and tell you to buy whole life insurance. So, if you are under age 60, you might want to avoid 10 year term policies. Unless you know you are going to die within that time frame. |
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mbrcatz
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You can't cash it in.
You pay it once a year, it's a straight bet with the insurance company about whether or not you're going to die in the coming year. If you cancel it in the middle of the year, and you paid the year in full, you can get some of the money you paid THAT YEAR back.
You cash in WHOLE life insurance policies, after they build a "cash value". Which takes years and years and years. |
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insuranceguy
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I am a licensed insurance agent and would like to clear up a couple of things. Some of the posts give a pretty good explanation of term insurance. However, I also noticed some misleading and misguided statements.
Term, while cheaper initially, can get more expensive if someone keeps going from one term into another. That is something I often see. While the idea of buying term and investing the difference seems like sound advice, in my experience very few do. What I often see is people going in and out of policies over many years of paying all those premiums and in the end having little to no insurance. I say buy term for temporary responsibilities such as income replacement for your children until they reach adulthood, making sure college will be paid for the kids whether you live or die or covering a mortgage or other debts. On the other hand, permanent insurance (I recommend Universal Life as it is more affordable) makes sense for responsibilities that will likely never go away. For example, in the retirement years a spouse may suffer a significant loss of income if the other spouse passes away. The surviving spouse can keep only one Social Security income, often times a retirees pension may not all go to the surviving spouse. They may even lose it all. So if the surviving spouse faces a significant loss of income in the case of death, permanent insurance can offset that loss. There are a host of other reasons why one may may want insurance no matter when they pass away, such as paying for estate taxes, final expenses, leaving a legacy.For most people, their greater insurance needs can be covered with term, with a lesser portion being permanent. While I do not promote life insurance as an investment, the fact is that the cash values can grow at a minimum guaranteed rate that provide one with many options down the road. Whether you live, die or quit- you benefit! |
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