Life Insurance is the foundation of financial security for you and your family. It protects your financial resources against the uncertainties of life so you can plan for the future. Generally, there are four kinds of life plans available in the market:
- Term Life
- Return of Premium Term
- Universal Life
- Whole Life
Most life insurance plans are strictly these or combinations of these. Before you read any details on these products, we would like you to please study the following table. It will give you a very basic and essential comprehension of how these four products function and cost factors involved.
Here is a simple comparison of four different most common life insurance plans:
Term Life Insurance |
Return of Premium Term |
Universal Life Insurance |
Whole Life Insurance |
Mostly available for 10, 15, 20,25, 30 yrs. |
Mostly available for 15, 20,25, 30 yrs. |
Available till age 100 and beyond. |
Available till age 100. |
No cash value. |
Refund of premiums at the end of the term |
Possible cash value. Based on how policy is structured. |
Guaranteed cash value over the years. |
Premiums Level throughout the term. |
Premiums Level throughout the term. |
Premiums Level throughout the term. |
Premiums Level throughout the term. |
Least expensive. |
Premiums higher than term life. But money comes back in the end. |
Premiums higher than term and ROP term life. Life time coverage. |
Most expensive. Matures at the age of 100. |
Optional Riders available. |
Optional Riders available. |
Optional Riders available. |
Optional Riders available. |
Hypothetical Example:
30 yrs term/$500K for a 35 yrs old male NS in best health for $36.00 monthly. |
30 yrs coverage with guaranteed refund of premiums would cost $63.00 monthly. |
Pay for 30 yrs a premium of $239 monthly. Guaranteed coverage till age 121. |
This may go as high as $500 or more monthly for the same coverage. |
Term Life
This form of insurance is good only for a specific period of time. In general, it may be 10, 15, 20, 25 or 30 years. Some insurance carriers also offer term for up to 35 years, and you can select any year between 10 and 35. Term Life insurance has traditionally worked as a great starting point for most people. You can get a lot more coverage for a lot less premium.
Most term plans are Guaranteed Level Convertible Terms. It only means that your premium will not change for the duration of the term, and within a set number of years you will have the option to convert your term insurance into Universal Life or Whole Life (Permanent plans). If and when you choose to covert, the new premium will be based on your current age and not health. For example, imagine you bought a 20 years term life at the age of 35, and at 45 you just had a heart attack or are hit by some form of cancer. Now your concern is to have life insurance the coverage for the rest of your life. But because of your illness no insurance company will cover you for a fully underwritten plan at an affordable premium. At this stage your insurance company that you already have term life with will not be able to decline from giving you a permanent life coverage based on your current health. All you will do is pay a new higher premium without any proof of insurability for a plan that covers you for the rest of your life.
Those of you who have heard about the renewable term insurance please remember that most term plans are renewable. But, it is an option even those who are financially doing much better that most population would not like to pay for. Because once the term is over, the policy then renews annually with increased premium each consequent year. Before you know, it becomes completely unaffordable.
Some of the circumstances under which a term plan will work great are:
- If affordability is major factor.
- If you would like protect family against loss of home upon your untimely demise. In other words, to protect mortgage.
- If you need temporary coverage only, while the kids are young and the family is growing.
- to protect your loved one or your business partners against inability to pay off loans you have taken with them
In short, term life insurance is a very basic life insurance product that creates an immediate estate for less. If your have financial obligations toward the people you love and care, there is no excuse to walking without this coverage.
The following table will show you how inexpensive term can be:
15-YEAR GUARANTEED LEVEL TERM LIFE INSURANCE MONTHLY RATES |
Insurance
Amount |
Age Female |
35
Male |
Age
Female |
40
Male |
Age
Female |
45
Male |
Age
Female |
50
Male |
Age
Female |
55
Male |
Age
Female |
60
Male |
100,000 |
8.49 |
8.66 |
9.89 |
10.68 |
12.08 |
15.66 |
15.14 |
20.91 |
19.43 |
28.09 |
28.96 |
40.60 |
250,000 |
10.50 |
10.72 |
13.13 |
13.34 |
18.59 |
23.84 |
24.72 |
36.53 |
34.34 |
52.94 |
54.69 |
84.22 |
500,000 |
16.63 |
17.06 |
21.88 |
22.31 |
32.38 |
43.31 |
56.88 |
83.56 |
64.31 |
101.50 |
105.00 |
164.06 |
1000,000 |
27.13 |
28.00 |
37.63 |
39.38 |
60.38 |
77.88 |
109.38 |
159.25 |
118.13 |
195.13 |
201.25 |
317.63 |
Please note: These estimated premiums are based on actual date of birth at Preferred Plus Non-smoker monthly rates. Rates are higher for other underwriting classifications. Rates are also subject to change, state availability, and issue limitations. Only A, A+ or higher rated carriers offered.
Return of Premium Term Life
This is a term life plan that refunds all your premiums at the end of the term if you are still alive. This product has been available for years now. Millions of people across the country have enrolled for this revolutionary product. It has been exciting the serious life insurance buyers ever since its inception.
Consider the following rates for Return of Premium Term and the Refund:
Age / Gender |
Rating |
Amount |
Term |
Premium* |
Refund |
35 / Male |
Preferred Plus NS |
500,000 |
30 Yrs |
$63.44 |
$22,838.40 |
35 / Female |
Preferred Plus NS |
500,000 |
30 Yrs |
$47.69 |
$17,168.40 |
45 / Male |
Preferred Plus NS |
500,000 |
30 Yrs |
$145.04 |
$52,214.40 |
45 / Female |
Preferred Plus NS |
500,000 |
30 Yrs |
$94.06 |
$33,861.60 |
Estimated premiums are based on monthly rates using insurance carriers rated A, A+ or higher by A.M. Best. Rates are higher for other underwriting classifications. Rates are also subject to change, state availability, and issue limitations.
If in case the policy is cancelled before the end of the term, most companies will offer you partial returns of premiums. The general rule of thumb is that the longer you keep this policy the higher you’re your return of premium. Before you consider this product, make sure you ask your agent to give you an illustration by the insurance company.
There is an extra cost to a purchase Return of Premium term policy. If you can afford it, it is worth the money!
Universal Life
So far we have dealt with relatively simple life insurance products. Universal life insurance, unlike term life and return of premium term life plans is a permanent plan. Once purchased, I should cover you for the rest of your life.
Before we go further into simplifying this, a rather complicated product, please keep in mind that Universal Life insurance plan, no matter what kind you buy is not an investment. If you are looking for an investment,
life insurance is not the product for you.
Historically this product was created as something that offered flexible protection, flexible premiums and flexible design, a hybrid between term life and whole life.
Primarily, they are of three kinds:
Single premium
A single substantial initial payment to the insurance company provides permanent life insurance when a lump sum of cash—from a savings or retirement account, an inheritance, an insurance payout, a gift or even a lottery windfall—is available and life insurance coverage is essential.
Fixed premium
You do not have the option to pay less or more. You pay a fixed amount of premium for certain number of years and you are done. For our purpose here, we will study a little bit about fixed premium guaranteed level product.
In this case you will be paying premium a set number of years and then stop paying. But your coverage will remain active for the rest of your life, even beyond age 100!
Consider the rates for this tremendously popular and useful fixed premium product that gives you a lifetime of coverage without having to pay for entire lifetime:
Age / Gender |
Rating |
Amount |
Pay premiums for |
Premium |
Covers you beyond age |
35 / Male |
Preferred NS |
500,000 |
30 Years |
$232.89 |
100 |
35 / Female |
Preferred NS |
500,000 |
30 Years |
$204.66 |
100 |
45 / Male |
Preferred NS |
500,000 |
30 Years |
$438.34 |
100 |
45 / Female |
Preferred NS |
500,000 |
30 Years |
$373.38 |
100 |
Estimated premiums are based on monthly rates using insurance carriers rated A, A+ or higher by A.M. Best. Rates are higher for other underwriting classifications. Rates are also subject to change, state availability, and issue limitations
Flexible premium
The flexible premium feature of the policy allows you to change your premium payments, depending on the policy value and your current financial needs. For example, you may be able to skip a premium payment or decrease/increase your premium payments.
Traditionally, most people have had problems with this product. If you like this kind of product please make sure you understand it well before hand. Always, demand an illustration and make sure that to go through it carefully.
For our purpose here, we will study a little bit about fixed premium guaranteed level product.
In this case you will be paying premium for 30 years and then stop paying. But your coverage will remain active for the rest of your life, even beyond age 100!
Whole Life
Whole life policies are a type of cash value plans that offer protection throughout the person's "whole life." The premiums are generally guaranteed level for the life of policy. As long as you pay the premium when due, the policy remains in force throughout your life or until you cash it in.
There are two types of traditional whole life policies:
- Nonparticipating policies provide a schedule of guaranteed premiums and death benefits and a table of guaranteed values, but they pay no dividends.
- Participating policies guarantee premiums, death benefits, and cash values, and also may pay policy dividends. Because of the dividend feature, premiums tend to be higher. However, the total return in dividends may offset the higher premiums as the policy ages.
You will have several options for using policy dividends, including letting the dividends compound with interest, taking the dividends in cash, using the dividends to pay toward the premium, buy permanent paid-up additions, or buy a combination of one-year term and additional permanent paid-up additions.
When making your purchase decision, remember that dividends are not guaranteed and may differ from those shown in illustrations. Ask for a company's history of projected dividends versus paid dividends.
Give us a call today for a confidential consultation. |
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