Term Life Insurance

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What is the difference between term life insurance and whole life insurance?

top-family-portrait-ideasTerm life insurance is the least expensive type of life insurance. The most common type of term life is level term insurance. 10, 20, and 30 year level term policies are the most common. Premiums are set for the number of years chosen. If the policy holder chooses to buy another term life policy at the end of the original term life policy rates are considerably higher due to age and probable health history.

Whole life insurance is more costly (approximately five times as much) than term life insurance. The extra premium builds a cash reserve that allows the policy to stay in force until the insured’s death. In short, term life insurance is temporary and whole life insurance is permanent.

What determines the rates on a life insurance policy?

Age is the first criteria in deciding rates. Next is gender and if the applicant is a tobacco user. Health history and lab results also determine how much a policy will cost and if someone is eligible for life insurance.

The most common rate up or decline reasons are high blood pressure, high cholesterol, high blood sugar, obesity, or serious illness such as heart disease or cancer.

Most companies have 6 to 8 rates to offer depending on health evaluation. A (1) rate is the lowest and a (8) rate is the highest. A perfectly healthy young applicant may get the absolute lowest rate (1) for their age and an older person with a health history may get the preferred rate but a (3) or (4) category meaning a rate up.

How do I decide how much life insurance I need?

That amount can be determined by the amount of debt you have, how much your mortgage is, the number of children you plan on sending to college, etc. These are generalizations but these are some of the factors that determine the amount of life insurance a person buys. Ask yourself this…..what would I want to leave my family in case of my untimely death? If your mortgage is $100,000, you have three children with a college price tag of $200,000, and your annual income is $125,000. A simple analysis would be 4 times the income plus the college cost and the mortgage….$800,000. This is simplified but you get the idea. We can provide you with a needs analysis that helps determine the amount of life insurance coverage you need.

How long does it take to have a life policy put in force?

The processing time depends on the amount of coverage and the age of the applicant. Younger age people purchasing amounts below $150,000 can get approved right away if their health history is good. Older people will be required to have a nurse exam in their home or office. This involves a blood and urine sample, height and weight measurement, health questionnaire, blood pressure reading, and for higher dollar amounts a resting EKG. For life policies of higher dollar amounts and older age groups doctors records are reviewed during the underwriting process.


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