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Best Term Life Insurance Rates (Really!)

FinanceGuy — Sun, 25 Jul 2010 20:16:24 +0000

Beware of The Best Term Life Insurance Rates!

Beware The Best Term Life Insurance Rates!

That may sound like a severe warning, to ask people to be careful of the best quote they got for a term life insurance policy. But policies and pricing schemes different. What looks like the best rate today may not look so good in 5 years. And yes, we have said before that insurers are different, and you can save money by comparing rates. But just be sure you are – as they say – comparing apples to apples.

Note: Take Advantage of Our Life Insurance Rate Quotes

Does The Term Policy Have a Conversion Option?

Some cheaper term policies do not have an option to convert, before the policy expires, to a permanent policy without having to resubmit to health underwriting. That cheap 10 year or 30 year term policy may be great now, but it is also prudent to keep your options open the future.

Many peope don’t even consider the value of an option to covert later. If you are healthy today, that’s great. But it is hard to know what will happen in a few decades, and it is nice to know you have left the door open to buy permanent coverage at standard rates, even if you do happen to get sick or old (as we all must).

Sure, rates for whole life will be higher, per amount of coverage. Most people solve this by settling for a much smaller death benefit to cover retirement needs. They an also use the permanent coverage in a senior life settlement, and actually sell that permanent policy for a percentage of the death benefit while they are still alive.

Are The Best Term Rates Guaranteed To Be Level Through The Whole Term?

Most of the time, the rates you are quoted in year one of your policy, will also be the rates you get in year 20. But sometimes, we have seen cheaper quotes because the quote was only guaranteed for 5 years! That means the price could go up in year 6, go up again in year 11, etc. Over the whole term of the contract, the policy owner would actually pay more.

Are You Really Qualified for That Super-Preferred Rate?

We have seen a lot of ads for cheap term life insurance that promoted the very best rate that only 6 people in the whole state would every qualify for. Once people applied, the actual price came back quite a bit higher, and those applicants were unhappy. But those best rates could be reserved for people who had no bad health habits, no family history of disease, great credit, and the perfect height and weight. Can you control all of this? We do not think that most people can.

The Term Period Matters Too

Even if you are comparing identical products, you must know that the best 10 year term rates will be lower than the best 20 or 30 year terms. The longer the insurer takes a risk, they more they will charge for that risk. The ten year term policy will be cheaper because the insurer only has to guarantee the price and coverage for one decade, and not for 2 or 3 decades.

Other Term Life Riders

Some policies may also come with other valuable features that make them more expensive, but more useful. Return of premium, waiver of premium, disability, or critical illness riders can add more coverage, but raise the premiums. If you do not want to pay for these options, that is your choice.

We just want you to be sure you understand what you are paying for!

ROP Pays You Back!

admin — Wed, 20 Jan 2010 13:32:08 +0000

Return of Premium (ROP) Gives Back Money

What if you could purchase an insurance policy, be lucky enough not to ever use it, and then get all of your money back at the end. This would seem like a win-win situation. You would be protected, but if you never needed to make a claim, you could get all of your premiums back in a nice check.

Well, this situation does exist in the real world sometimes. You can find return of premium term life insurance policies. You will still purchase your policy to last for a specified amount of time, like 20 or 30 years. Then, when the policy expires, if nobody has collected on the policy, a check comes back for the amount of all of the premiums paid.

An Example of ROP at Work

Consider the situation of a 40 year old man who wants to purchase a 20 year term policy with a death benefit of $500,000. Now understand that premiums vary by age, health, location, etc., but let us just say his premium is $50 a month. You can calculate his total premiums for twenty years by multiplying 50 * 12 * 20 = $12,000.

At the end of his term, he is now 60 years old. He has not passed away, so while he may be happy to be alive, he still has nothing left to do with that life insurance contract.

But let us say he choose to purchase a return of premium rider when he bought his life insurance. Now this additional benefit will cost a bit more, so for the sake of illustration, we will assume it adds ten dollars to his monthly premium. Now you can figure that he paid $14,400. In the end it cost him $2,400 more. than the basic policy without an ROP rider.

But now, instead of having a worthless piece of paper, this man will get back a check for $14,400! This seems like a good incentive to keep a policy in force. Not only do you have coverage for the period of your policy, you also get to look forward to collecting your premums if you survive it. If you do not survive the policy, the normal death benefit would be paid out ot your beneficiaries.

The Cost of Return of Premium Term Life Insurance

You understand that this example just used some figures for illustration. You can run some quick and free quotes to compare life insurance costs.

Return Of Premium Term Life Insurance

admin — Wed, 05 Mar 2008 21:40:01 +0000

Compare Term Life Insurance With Return of Premium (ROP)

We put up a new page on Return of Premium Term Life Insurance. We would like to explain this a little more here. Return of Premium (ROP) is actually a rider you can select to add to some term life policies. It costs a little more, but you do get a big benefit. So sometimes a rider can cost more, but it can leave you with more money in the long run.

Let us say you purchase a 30 year term policy with $200,000 of death benefits. If you pay your premiums for 30 years, you have coverage in case you die. But if you do not die, your policy has turned into a worthless piece of paper at the end of 30 years. You can consider yourself lucky to be alive though!

But consider an example of purchasing that same 30 year term policy with a ROP rider. At the end of 30 years, if you kept your policy in force (paid the premiums), you will get a check back for every cent you spent! How much luckier is that?

Look at Ms. Davis who purchased a 30 year term policy with a $250,000 death benefit when she was 32. Remember that I am just using some example numbers, so do not think these represent actual premium prices. But let us say her monthly premium for term life is $32. If she choose the return of premium rider on her term life policy, she would pay $5 a month more. So that would make her term life with return of premium cost $37 a month.

With just the term policy, she could make it to the age of 62. After having paid over $11,000, she gets to tear up her policy. What if she had decided to pay extra for the return of premium benefit? Well, she would have paid more. She would have paid over $13,000 over 30 years. But, at the end of that time, she can collect a check for that amount back from her insurer!

This can be a handy tool for retirement planning too. You have purchased coverage for your working years when your mortgage must be paid off and children have to be supported. Then, when you face retirement, you can get a handy check to help you fund your accounts. Or sometimes, a year or so before the term policy will expire, insurers will offer to convert to whole life so you can use your check to fund retirement life insurance. A seniors life insurance policy is usally a smaller face value whole life policy that can pay for final expenses.