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TERM LIFE INSURANCE
Term Life Insurance is the lowest cost life insurance product available.
When you buy term life, you are purchasing "pure" insurance, which
typically does not include a cash value or a savings feature. Term Life
Insurance, as the name implies, is purchased for a particular "term" or
length of time. Coverage is available for 5, 10, 15, 20 or 30 years.
Once that term period has arrived, and you do not convert your term
policy to a "permanent" type, your life insurance will expire. If the
insured dies within the "term period," the predetermined death benefit
will be paid to the beneficiaries.
"Level Term" insurance includes low premiums and steady coverage over
the term of the policy. In other words, your premiums do not go up and
your coverage does not go down as long as your premiums are current.
Premiums remain level for the term of the policy.
"Annual" or "Yearly Renewable Term" offers the lowest initial cost life
insurance available. Premiums for this type of life policy will start
our very low; however, the premium will increase each year. In general,
Yearly Renewable Term policies are most efficient during the first 3 to
4 years. If you plan to keep your policy for longer than that, you
should consider Level Term.
There are a number of reasons to purchase term life insurance. Families
use term for security. In case the insured passes away, your Term policy
insures there will be money to use to pay for your home, college,
outstanding loans and other major expenses.
Small business owners use Term Insurance as low cost debt protection to
cover notes, lease obligations, business real estate mortgages and other
expenses (key man insurance).
Business Partnerships often use Term Insurance to buy out partners in
the event of their death. For example, the deceased's beneficiary gets
the insurance proceeds and the ownership in the company is then
transferred to the remaining partner(s).
Corporations use Term Insurance as stock purchase redemptions. In this
case, the corporation gets the insurance proceeds and buys back the
stock from the deceased's beneficiary, normally the surviving spouse or
estate.
There are several different reasons for purchasing term life insurance.
These reasons tend to suggest a period of time (term period) that would
be most appropriate for you. Some examples may be:
5 Year - Generally speaking, the more specific the need for insurance
is, the shorter the term period tends to be. For example, if you have a
child going to college for four years and no need for the insurance
thereafter, a five-year term may be perfect for you. Another example of
the need for a five-year term would be to protect a short-term loan.
10 or 15 Year- Many families choose 10 or 15-year term policies to
replace one or both of the parents' income(s) in the event of death.
This allows the surviving family members to use the death benefit as a
replacement source of income. This is especially useful where the
children will be self-supporting before the 15-year term has expired, or
the home carries only a 15-year mortgage.
20 Year- this is a very common choice among people seeking longer-term
coverage because of the cost effective nature of the premiums. For
example, over 20 years the total premium on a 20-year policy generally
costs much less than purchasing a 10-year policy and then keeping the
same 10-year policy for an additional 10 years. If you have young
children at home, a 20-year term policy could be the perfect choice for
seeing them through their college years.
30 Year- Mortgage protection is good reason for a 30-year term policy.
If you have a 30- year mortgage, you can take out a life insurance
policy that will cover the entire period. This will remove any stress
you might otherwise feel about leaving your family a financial burden
instead of a home that is free and clear.
When trying to decide which term period is right for you it is important
to know your options. You can always apply for a new term insurance
policy after your term is through. At this point you have 3 options.
* Option I - New Policy - Depending
on your age and health, you can apply for a brand new policy with either
your existing company or a new company. The new policy will simply
replace the former policy. You must be careful when doing this because
new underwriting requirements must be met with a new policy. Be sure to
keep your old policy in force until you know the outcome of your new
application. If your health has deteriorated you might face extremely
high premiums, or even worse you might be refused coverage.
* Option II - Keep your existing
policy- If you know your health is bad, you can continue paying on the
existing policy after it expires. It will automatically continue as an
extension of your existing policy without providing medical evidence of
your insurability. The downfall with this option is that the policy
typically becomes annually renewable. This means that each year after
the guaranteed term period has finished, the premiums will begin to
increase substantially every year.
* Option III - Convert to a
permanent policy - You can convert your policy to a permanent life
insurance policy and lock in your premiums at a higher level for the
rest of your life.
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UNIVERSAL LIFE INSURANCE
Universal Life Insurance is a kind of flexible policy that lets you vary
your premium payments. You can also adjust the face amount of your
coverage. Increases may require proof that you qualify for the new death
benefit. The premiums you pay (less expense charges) go into a policy
account that earns interest. Charges are deducted from the account. If
your yearly premium payment plus the interest your account earns is less
than the charges, your account value will become lower. If it keeps
dropping, eventually your coverage will end. To prevent that, you may
need to start making premium payments, or increase your premium
payments, or lower your death benefits. Even if there is enough in your
account to pay the premiums, continuing to pay premiums yourself means
that you build up more cash value. (taken from the National Association
of Insurance Commissioners' Life Insurance Buyers Guide)
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VARIABLE LIFE INSURANCE
Variable Life Insurance is a kind of insurance where the death benefits
and cash values depend on the investment performance of one or more
separate accounts, which may be invested in mutual funds or other
investments allowed under the policy. You will have higher death
benefits and cash value if the underlying investments do well. Your
benefits and cash value will be lower or may disappear if the
investments you chose didn't do as well as you expected. You may pay an
extra premium for a guaranteed death benefit. (taken from the National
Association of Insurance Commissioners' Life Insurance Buyers Guide)
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WHOLE LIFE INSURANCE
Whole Life Insurance covers you for as long as you live if your premiums
are paid. You generally pay the same amount in premiums for as long as
you live. When you first take out this type of policy, premiums can be
several times higher than you would pay initially for the same amount of
term insurance. But they are smaller than the premiums you would
eventually pay if you were to keep renewing a term policy until your
later years. Some whole life policies let you pay premiums for a shorter
period such as 20 years, or until age 65. Premiums for these policies
are higher since the premium payments are made during a shorter period.
(taken from the National Association of Insurance Commissioners' Life
Insurance Buyers Guide)
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What is a Paramedical Exam?
The Exam
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A paramedical exam consists of some questions about your medical
history, measurements of your height and weight, blood pressure and
pulse. A urine specimen is also collected. Undressing is not required
and the exam usually lasts 20 to 30 minutes. Your application for
insurance is not complete until this necessary information is obtained.
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A urine specimen will always be collected during a paramedical exam. The
tests done are determined by the insurance company and are performed by
a laboratory. The test results will be sent only to the insurance
company and are used in the underwriting process.
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All of the information obtained during the paramedical examination is
strictly confidential and for insurance purposes only. It will be
forwarded to the insurance company for review to help evaluate your
individual policy.
Blood Testing
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Blood testing has been found to provide important information for
underwriting purposes. A wide range of tests are completed by a
laboratory and the results are sent only to the insurance company.
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Experienced personnel draw less than one ounce of blood from a vein,
into 1-3 vials. You may be required to fast from 4-12 hours depending on
the requirements of the insurance company. You should advise your
examiner if you have had previous problems such as fainting, nausea, are
currently taking large doses of aspirin, have difficulty clotting or
bruise easily.
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Each individual insurance company selects the tests they need for the
underwriting procedure. The paramedical examiner is requested only to
collect and prepare blood for analysis; the insurance company gives
instructions to the lab regarding specific tests. You are required to
sign a consent form for your own protection.
Electrocardiogram
An electrocardiogram is a recording of the electrical impulses
associated with cardiac contraction and relaxation. The ECG does not
cause any pain.
You will be asked to lie down flat with your shirt unbuttoned in order
to place the leads on your chest. You can assist the technician in
obtaining a good ECG by remaining calm and totally relaxed to prevent
muscle interference.
To save you time and to obtain the best
possible results, please follow these helpful suggestions:
1. Blood pressure and pulse can be artificially raised by stress,
alcohol, caffeine and tobacco.
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Get a good
night's sleep the night before the examination.
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Abstain from
alcoholic beverages for at least eight hours prior to
the exam.
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Do not smoke
or chew tobacco for at least one hour prior to your
examination.
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Avoid
drinking coffee, tea or caffeinated soft drinks for at
least one hour prior to your examination.
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Limit salt
intake and high cholesterol foods 24 hours before your
examination.
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You should
not engage in strenuous physical activities 24 hours
before your examination.
2. Advise your Paramedical Examiner
regarding any medication you are taking, even if non-prescription
medications.
- Have available your
physicians' names, addresses, dates of past visits, names of
any prescribed medications and any information regarding
injury and major illness during the previous 5 years.
- If you belong to Kaiser or
any other prepaid medical plan, have your medical record
number available.
3. Drink a glass of water an hour or so
before your appointment. This will help in obtaining a urine specimen.
4. If a blood specimen is required, you should not eat any food for 8
hours prior to the examination unless otherwise instructed.
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