March 10, 2015

Why Choose Term Life

The Benefits of Term Life Insurance.

Why you should Choose Term Life Over Whole Life.

Why people should get a Term Life Insurance.

Why is Term Life so Simple?

Why Choose Term Life:

As opposed to various Cash Value Life Insurance Policies – such as Whole Life, Universal Life, Variable Life, etc?   Frequently debated online and at social gatherings, the rise of term life insurance as the industry standard is an interesting tale.   Why should you consider whole life insurance vs term life insurance?   Below kindly find an abbreviated list of reasons why level term life insurance is quickly becoming the best option for you and your family.  If you do nothing else, consider getting a quote from a low cost term life insurance provider.

1.  Cost – Simply put the cost of term life insurance is often a tenth of the price, sometimes less.  Of course, it does depend on the exact example, depending on the type of Cash Value Life Insurance Policy and the type of Term Life policy.   Why should you pay more?

2.  Ease – You can buy term life insurance on the phone, in person, online and start the process very fast.  Fill out a few forms, many of them online and be done with it in short order.  Given the complex accounting methods (my choice of words here) used with whole and universal life you might need to spend weeks reviewing them, just to make an educated decision.  I have had fully underwritten policies issued in eight days or less.  Although this is not necessarily common, it is definitively possible and it can be easy.

3.  Speed– If you want to evaluate a whole life insurance policy, you may consider reaching out to dozens of companies and wading through thousands of pages of contracts to make an informed decision.  You may even want to hire an expert to assist you with this.  But Term Life?  You realistically can do a good job at it and have you policy fully in force in 30 days.  You may even quality for be ‘temporarily bound’ that same day!

4.  Simplicity– Term life is so much more simpler than whole life insurance its almost comical.  Since there is no cash value, there is really not as many things to worry about.  Term life has often been called pure insurance.  With term life, assuming you pay your bills on time, you will be insured for a given set of years.  Why is term life so simple?  Mainly because it is sold purely as insurance and not with a financial “cash” value addition.

5.  The Open Market–  Term Life Insurance is typically  sold in 10 year, 20 year, and 30 year increments in a level fashion.   There are also 15 and 25 year policies as well.  Yes there are other options and ways to purchase it, but these three time frames and the level method seem to be the industry standard now.  Any independent agent worth his salt can produce dozens of quotes with A rated companies.  Why?  Because for independent agents its is an open market now a days.  This is not necessarily the situation with Captive Insurance Agents.   Independent Agents often will work through general agencies (brokerage general agency) that combine 50 or so insurance companies together allowing you the client to see all of the options available.

6.  Comparable Policies– Find someone who is impartial that also has the time and understanding on how to compare 10 different universal life insurance policies and you will likely need to pay them a lot of money.    Just go ahead and attempt to compare Whole Life insurance policies yourself.  But Term Life?  Its its pretty simple to compare one company’s product with anther.   You can even align them up on a spreadsheet to assist you in that decision.   Want to focus on A+ rated carriers because of their credit worthiness?  Rather focus on the yearly premium?   Consider only name brand companies?

for the vast majority of Americans Term Life is the Best Choice

7.  It is the new model–  Perhaps in the 1950s before the advent of 401Ks, IRA, and 529s, a Whole Life Insurance Policy may have had a more prominent role in your finances, but today, the new model often suggested is to buy term life and use the remaining amount of cash to fill up 529s, Roth IRAs, and 401Ks.  Why do it this way?  I am not a not a financial planner, you should consider asking one, but it would seem generally better use of your finances.

8.  Its comparable–  One level 20 year policy is generally comparable to another.  With the exception of the payout exclusions and underwriting criteria (which a good broker can assist you with) it is relatively simple to review 4 or 5 options yourself and make an educated decision.  Have a special health situation?  Make sure you speak with a human and not just a computer.

9.  You need it– In general Term Life Insurance is indeed needed by the masses.  Most people that have children or other dependents are instant candidates.  Level Term Life Insurance can also assist in paying off a mortgage or some other debt.   Other debts can include car loans, a second property, anything really with a loan.  It can also theoretically be used to pay the inheritance or property taxes on a property or high valued item.

10.  You want it– When is the last time you heard someone say – “I should not have gotten that term life policy”?  Perhaps these words have been uttered before, but I have never heard them.  More than likely, though, your estate attorney will want you to have it.

11.  Your spouse wants you to have it– Simple, Affordable Term Life Insurance is recommended by most financial planners.  There is a reason for that, it is simple and affordable coverage that you are likely to be able to fund for the period of time that you sign up for it.

12.  Your kids need you to have it– The most common reason people buy term life insurance is to help financially provide for your children in the event of your untimely death.   Procuring term life insurance is one of kindest and thoughtful things to you can do for your children.

13.  A Simple Straightforward Decision– What are the factors that can help you decide?   Credit Rating, Yearly Premium, and potentially your Agents recommendation are three of the things that you should consider.  With Term Life Insurance you don’t need to worry about guaranteed vs non guaranteed payouts, participating options, paid up additions, Term Life is a Simple and Straight Forward Decision.

14.  The costs to get out – want to quit a Whole Life Policy? Better read the fine print, you may find that that cash value is not the cash you thought it may have been.  Term Life?  Just stop paying the bill and notify the insurer.   Typically the policy will expire at the end of the paid term. Of note is that once you cancel a term policy and you can not start it back up.  You will  need to go back through the entire process again and get a new rate.

15.   Sleep– You will sleep more soundly after you are all set up.  Just trust me on this one.

Are there situations when I would recommend Whole Life Insurance?  Yes, there a couple.  But for the vast majority of Americans today, I truly believe that Level Term Life Insurance is the best financial decision an individual can make.

A Great Term Life Insurance Tool:

If you are looking for a solid life insurance product to help you in your selection of options and insurance companies, consider this awesome life insurance tool. This tool allows you to sort life insurers by Fast Coverage, Health Issues, and Age.  It is truly one of the very best tools available on the internet.

Terms and Definitions of Life Insurance:

Direct from IRMI website:

Term Life Insurance: A policy that gives protection for only a definite period of time (e.g., 1, 3, or 5 years). If death occurs during the term for which the policy is written, proceeds are payable to the beneficiary. If the insured survives the term, the policy expires. There is no cash value build-up in a term policy. Guaranteed renewable term insurance can be renewed without proof of insurability. Under other types of term insurance, the insured must once again undergo an underwriting process (e.g., a medical examination).

Whole Life Insurance: Permanent life insurance that provides for the payment of the face value upon death of the insured, regardless of when it may occur. This contrasts with term insurance, which pays benefits only if death takes place during the limited term of the policy. Under whole life policies, the insured pays a level premium rate all of his or her life. This approach results in an overpayment of premiums in the early years of the policy and an underpayment in the latter years—which averages out over the life of the policy. Whole life insurance also accumulates a cash value that the insured may borrow or otherwise use.

Also

Universal Life Insurance: A very flexible life insurance product that pays much higher interest than conventional whole life and allows the insured to adjust the premium and death benefits.

As with all website and internet information, kindly see a licensed insurance broker or agent in your state before deciding to buy or not buy any insurance related product, especially Life Insurance.  Please See our full disclosures.

Marindependent Insurance Services LLC – 0K10734

Scott W Johnson – 0H11625 – Independent Insurance Services in California

About Marindependent Insurance Services LLC:

Marindependent Insurance Services LLC is an independent boutique insurance brokerage and agency focusing on small business, homeowners, umbrella, and term life insurance in wonderful California.

About Mr.Johnson: Scott lives and works in Marin County with his wife, two boys, and dog. His interests include skiing, mountain biking, hiking,  running, traveling, reading, and investing.  He sleeps soundly almost every night knowing his family is secure with his own personal term life insurance policy.

This post should serve as an introduction to the world of insurance and the insurance industry but not replace personal service from a licensed insurance broker or agent. Please consult an agent or broker in all circumstances when considering obtaining insurance, insurance services, or modifying or cancelling a policy. All insurance agents and brokers in the State of California are regulated by the California Department of Insurance. The State of California – Department of Insurance may (or may not) have different rules or regulations than the state or country that you reside in, are insured in, or otherwise.