• zTermLifeInsurance Blog

  • Tuesday, September 07, 2010

Originally Life Insurance meant Term Life Insurance. There was no other kind.

Life insurance market was simple.
  • You decide how much you wanted your nominees to have

  • You decide how many years you want the coverage to continue

  • The insurance company asked you take a medical test

  • Based on the results of the medical test and your age, you were told how much your yearly or one-time lump sum premium would be

  • You decide whether you can afford it

  • You decide to go for it

Obviously, we have come a long time from that point and we have scores of types of policies now. But, a term life insurance is still quite popular. So, what is it about a term life insurance that still keeps it popular?

To a large extent, it is the lower premium amount in comparison to most other types of policies. Actually, the premium can be some 8-10 times lesser for the same insured amount. In other words, the insured amount can be 8-10 times higher for the same premium paid.

Now, how is it that premium for a term can be so much cheaper? And, why exactly did companies come up with so many other types of policies? And, why do people pay a higher premium for some kinds of policies if term life insurance is cheaper? We will explore this further in our other articles.
As we have seen in the earlier articles, Insurance Policies come in many forms. There are policies that cover the insured for their whole life, there are those that cover a person for a fixed number of years, there are some that return a fixed amount of money after the maturity of the policy, there are some that cover the insured even after the maturity of the policy. So, before a person decides to choose a certain policy, it would be wise to know what one wants. There are a lot of choices available, which can be often very confusing.

This article will cover the two major types of policies available with most Insurance companies. Please bear in mind that this article is only intended to cover the most important aspects of a policy, and there will always be additional clauses specific to that policy based on the Insurance company of your choice. Like they say – Please read the document carefully before signing on the dotted lines.

Here is a categorization of the major policies available out there:
  1. Temporary term life insurance policy: This is an insurance that stays in force for a fixed term (usually in years) chosen by the policy holder. It usually covers the insured event (read Death) of the insured for that period, and becomes out of force after that period.
  2. Whole life insurance policy: As the name suggests, this is an insurance policy that covers the policy holder for the insured event for the entire life and offers guaranteed cash payback to the nominee.

Usually, a term life insurance is cheaper than the whole life insurance. Further articles will cover more details on these.
Living abroad carries with it many unique needs, and the types of insurance plans that may suffice in your native country may not address the concerns of an international resident. This is not just true for health insurance, but for life insurance as well. If you are living or getting ready to live in another country, you should take the time to learn the benefits of international term life insurance.

International term life insurance can be purchased for a term of up to 10 years. This is a great benefit for someone who is only temporarily living abroad. For example, imagine your employer has assigned you to open a new international branch and oversee its development over the next five years. Surely you do not want to be locked into 20 years worth of coverage when you will only be staying for 5.

You can purchase up to $2 million worth of coverage, which will help ensure your family can meet any and all financial obligations that would have been made more difficult without the help of your income. It will also provide enough money to pay for expenses like repatriating your remains, as well as other experiences that are unique to the international resident.

Additionally, many plans are prepared to help you with the challenges that come with international travel and residency. For exmaple, you will need to find a new doctor in your new country; your plan will offer assistance with medical referrals. Or imagine that you need to book an emergency flight out of the country; your plan can help you with that as well. These types of benefits were designed specifically with your needs in mind, and they make your term policy even more valuable.
One of the things consumers really appreciate about term life insurance coverage is that they can purchase plans in predetermined increments. Being able to buy insurance in 10 or 20 year installments offers flexibility and it also keeps the cost low. But what do you do when your term coverage comes to an end?

One easy option is to simply renew your plan for another term. You can choose a timeframe equivalent to that coverage that is expiring (for instance, another 10 year term if you just completed a 10 year term), or you can purchase an installment of a different length. The choice is yours, and you can select the option that works best for you and your family.

Another option is to convert to a permanent life insurance plan. As your personal financial situation changes over time and your level of stability increases, you may be more comfortable with a permanent plan than a term policy. Consult with your plan representative to see what option makes the most sense for you.

It is good to know that as your term life insurance policy expires, you have multiple options available. Talk through these options with your family and carefully analyze your needs in order to determine whether you should renew your existing policy or convert to permanent coverage.
There are two main types of life insurance - term life insurance and permanent life insurance. Knowing which of the two is better for your unique situation can be difficult for first-time buyers. Here is some information to help you decide which is a better fit for you.

The main difference between these two types of insurance is the duration of time for which they are purchased. Term life insurance is bought for a specific period of time, such as 20 years. If the purchaser dies during that time period, his or her beneficiaries will receive a predetermine amount. The premium payment for this type of insurance may fluctuate over time. On the other hand, permanent insurance is just that - permanent. You'll make your purchase one time and be covered for life. There is no need to renew as you would with term coverage. Additionally, the price you pay stays stable over time.

Term insurance is better suited for people who do not have much savings to fall back on in the event of a tragedy. Without savings, keeping up with normal monthly bills or large debts like mortgages can be extremely difficult. Permanent insurance is more ideal for people who are older and closer to retirement age, and it is usually intended to simply pay smaller monthly costs as opposed to mortgages, car loans, and other larger items.

Term is also the cheaper of the two options.The reason for this is that since term coverage is only in effect for a certain period of time, it often expires without an insurance company ever needing to pay it out. So with a lower likelihood of payout, an insurer can charge a lower premium. So if lower payments are important to you, and you have not yet accumulated a significant base of savings, term will be your best bet.


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