Term life insurance is the easiest type of life insurance to understand. To put it simply, the insured person pays a minimal premium per thousand pounds of coverage on an annual, semi annual, quarterly or monthly basis. If he or she dies within the term of the policy, the life insurance company will pay the beneficiary the face value of the policy.

Distinctive Features of Term Life Insurance

To better understand some of the distinctive features of term life insurance consider the following points:

First, term life insurance is “pure insurance” because when you purchase a term insurance policy you are only buying a “death benefit”. Unlike with other types of “permanent insurance” such as whole life, universal life, and variable universal life, there is no additional cash value built up with this kind of policy. Term insurance only gives you a specific death benefit.

Second, the coverage is for a defined period of time (the “term”) such as 1 year, 5 years, 10 years, 15 years, and so on. Once the policy is in force, it only remains in force until the end of the term — assuming you pay the premiums, of course.

Third, most term insurance policies are renewable at the end of the term. With what is known as “Level Term Life Insurance”, the death benefit remains the same throughout the term of the policy, but since the insured person is getting older, the premium will gradually increase. As time goes by the cost of a level term insurance policy may become greater than you are willing to pay for a simple death benefit. An alternative is the “Decreasing Term Life Insurance” policy in which the premium remains the same, but the death benefit goes down as time goes by.

Fourth, most term policies can be converted to permanent policies within a specific number of years. If you decide it is important to retain the insurance coverage, converting may be something you should plan for. You can anticipate the accelerating cost of term insurance premiums and convert your policy before the premiums become prohibitively high. It is true that in the short term the premium will usually be higher than if you stayed with the term policy. But over the long term this difference will decrease because of the rapid acceleration of the term insurance premium as you get older. A permanent policy also accumulates cash value which increases the total death benefit paid to your beneficiary.

Popular Uses of Term Life Insurance

Term life insurance is most appropriate whenever you want to protect your beneficiaries from a sudden financial burden as the result of your death. Here are some of the most common uses of term life insurance.

Personal Costs Due to Death – When a spouse or family member dies there will be immediate costs. Many people purchase a relatively small term life insurance policy to cover these costs.

Mortgage Insurance – Banks and financial institutions often insist that mortgage holders retain a term life insurance policy sufficient to pay out their mortgage. Such policies make the bank the beneficiary of the policy. If the mortgage holder should happen to die before the mortgage is paid off, the insurance policy will pay it out. This is also a great benefit to a spouse whose earning power will likely be decreased due to the death of his or her partner.

Business Partner Insurance – Term insurance is also used by business people to cover outstanding loans with their bank, or to purchase a deceased partner’s shares on death, if they had an agreement to do so. Most partnerships have an agreement of this sort, and the policy premiums are paid by the business.

Key Person Insurance – When a company loses key individuals due to death, this can often result in hardship to the company. Key person insurance is purchased by the company for any individual it deems to be “key”. The company itself is made the beneficiary of the policy. So when a “key” person dies, the company receives a cash injection to handle the problems associated with replacing that person.

Getting a Term Life Insurance Quote

Here are some things to look for when getting a quote for term life insurance:

1. The cheapest rate today will not be the cheapest rate tomorrow. For instance, the cheapest premium today will likely be for a Yearly Renewable Term policy. This policy is renewed every year at which time your premium is also adjusted upwards. This is fine if you intend to convert to a longer term solution (permanent insurance) in a year or two, or if you have a very short term requirement for insurance. But if you think you will need this insurance for a longer period, you would be better to commit to something like a Ten Year Term Policy. This locks your premium and death benefit in for ten years. Your rates will not increase until you renew.

2. Compare coverage and premium projections for different policies. Think about the long term and get the coverage that saves you money in the long run.

3. Make sure you completely understand the conversion options built into the different policies you are considering. Most policies will let you convert part or all of your term insurance into permanent insurance within a specific period of time, and without the need of a medical examination.

4. For some situations you should consider options such as Decreasing Term Life Insurance in which the death benefit decreases as time goes by. This makes sense if the policy is being used to cover a mortgage or business loan.

Term life insurance is not the answer to all life insurance requirements, but it should be part of a sound plan for every person’s financial future.

Term life insurance is basically a no frills type of life insurance. It is a life insurance for a specified duration limit, or time. You buy a specific amount of coverage for a specific time period by signing a contract. You pay for that coverage period and at the end of the term the policy expires. For example, the term might be until retirement, or until children are grown, or until college is paid for.

Term life insurance is the least expensive available insurance policy and allows you to spend a lot less and use the extra money in a better investment. It does not build up cash value and the premium normally increases as the policy owner gets older. Usually term life insurance covers a specific term such as term of 1year, term of 20 years or term of 30 years.

If you die while the policy is active, term life insurance provides a stated benefit for it; and your survivors will be paid the agreed upon amount. However, the policy does not provide any returns beyond the stated benefit and once the policy expires, the insurance coverage ceases and the insurance company keeps the money. Some term insurance policies give you the right to renew at the same rate for multiple years, while others do not. The former are generally a bit more expensive.

Term life insurance is most suitable for you, if you are:
in need of coverage for a limited period of time,
young and looking for lower premiums,
buying a home or car, where the financial burden of a loan will disappear in time.

Term life insurance policies must be renewed when each term ends. Before buying a term life insurance policy, you should ask about the renewal provisions for the protection of your future insurability. There are some typical choices:
Annual Renewable—–the premium go up each year.
Level Term—–the premium stays the same for specific period like 5, 10, 15, or 20 years, then increases sharply.
Automatic Renewable—–you’ll have to pay more for this feature.

Some other options on term life insurance policies may include:
Re-Entry——it requires a lower premium than an automatically renewable policy. You can renew at the same low rate offers to new customer; but you’ll have to pass a physical examination. If you’ve developed any health problems, your premium could go up and cost more than an automatic-renewable policy.
Convert-able term——youll have the option to convert to a whole life insurance policy in later years.

When it comes to selecting life insurance policies the Internet is the place to look for the best offers. Life insurance companies have flocked to the Internet in recent times, supplying online life insurance hunters with an extensive choice of life policies. The growth in the number of life insurance companies servicing life insurance polices has made a significant impact on life insurance premiums too, bringing them down to record low levels. Basic life insurance cover can now be acquired for less than 50p per day, and in some instances for as little as 20p per day.

Besides choice and price, the Internet also offers convenience to people who are looking for life insurance polices. Life insurance information can be gathered and insurance quotes asked for at any time of the day or night. If it suits you to search out information on life insurance policies at five in the morning, then life insurance companies on the Internet are there for you at five in the morning.

Choosing between life insurance policies

There are four types of life insurance policy available from most life insurance companies. These are level term life insurance, level term life insurance with critical illness, reducing term life insurance and reducing term life insurance with critical illness.

Level term life insurance is the most basic type of the four policies. It guarantees pay out upon death of the policyholder should he / she die during the term of the policy. The premiums remain the same throughout the life cover as does the amount paid out in the event of death. It is important to note that many level term policies have an upper age limit after which the life company becomes free of its obligation to pay out.

Reducing term life insurance, which is also known as mortgage life insurance, works a little differently to level term policies. These are shorter policies that are normally taken out over the same term as a mortgage and guarantees pay out in the event of death during the term. However, unlike level term insurance the amount paid out on a claim reduces in line with the outstanding mortgage balance, so ensuring that loved ones left behind are not in danger of losing the roof over their heads.

Both level term life & reducing term life policies can be coupled with a critical illness product. This ensures that the policyholder and their family have an income for a certain period of time should the policyholder become critically ill and be unable to return to work. Critical illness policies also come with life insurance payment waivers so you don’t have to worry about your life insurance premium payments while you are in a critically ill state.

In general, may people understand that having life insurance in any form is a necessity. The policy of life insurance is an excellent method of providing protection for your family members in the event of your death. While many people understand that is important to have life insurance they may not understand that there are many different types of policies available in the world today.

One type of life insurance policy is called Whole Life Insurance, this type of life insurance is effective provided you continue to make the monthly payments upon the premium. This is a very popular type of life insurance because it allows you to build a cash value on the policy and is on a basis that is tax-deferred. The way this works is that a portion of the premium you are paying is put into an account of savings that the policy invests into. All interest that is earned upon the policy is put into the savings and helps to build the cash value. Once the cash value reaches a higher level, you could be required to pay the premium after age or you could be allowed to borrow against that cash value.

Another attractive benefit of having a whole life insurance policy is that your premium will always remain the same. At no time will the amount change at all, therefore as long as you continue to pay the premium each month, you will remain at the same amount for the entire time. If you choose to take a loan out on the cash value you have earned, the only difference you will have to pay is paying back that loan. One downside to this policy is the fact that you will have no control whatsoever over how the company chooses to invest the dollars you pay on your premium.

Another type of life insurance is the term life insurance policy. This policy is selected for a specified amount of time. If you should happen to pass away during the term of this specified time, then your family would then receive payment in the form of a lump sum as the contract specifies. Typically, the premiums upon this type of policy is far cheaper than other types and it does not allow you to build any type of cash value. With this type of life insurance, your premium can change or increase on a yearly basis and it generally does increase each year. It is the more expensive type of insurance that is available however it will provided your family with complete protection in the event of your death.

Insurance is designed to protect a person and the family from disasters and financial burdens. There are many kinds of insurance of which, the basic and most important is considered to be life insurance. It provides for the dependants after your death.

Since there are certain financial commitments you need to meet throughout life and do contribute in some way to the family income, you need to provide something even in deathto secure the home, help the family meet expenses for a while, protect dependant parents, or secure the children or spouse.

Financial obligations could include funeral expenses, unsettled medical bills, mortgages, business commitments, meeting the college expenses of the children, and so on.

How much insurance a person needs would vary, depending on lifestyle, financial needs and sources of income, debts, and the number of dependants? An insurance adviser or agent would recommend that you take insurance that amounts to five to ten times your annual income. It is best to sit down with an expert and go through the reasons why you should consider insurance and what kind of insurance planning would benefit you.

As an important part of your financial plan insurance provides peace of mind for any uncertainties in life.

1.Life insurance correctly planned will on premature death provide funds to deal with monies due, mortgages, and living expenses. It offers protection to the family you leave behind and serves as a cash resource.

2.It secures your hard earned estate on death by providing tax free cash which can be utilized to pay estate and death duties and to tide over business and personal expenses.

3.Life insurance can have a savings or pension component that provides for you during retirement.

4.Some policies have riders like coverage of critical illness or term insurance for the children or spouse. There are certain rules regarding eligibility for riders which you will need to determine clearly.

5.Having a valid insurance policy is considered as financial assets which improves your credit rating when you need health insurance or a home loan or business loan.

6.In case of bankruptcy, the cash value as well as death benefits of an insurance policy is exempt from creditors.

7.Life insurance can be planned such that it will cover even your funeral expenses.

8.Term life insurance has double benefits, it protects and you can get your money back during strategic points in your life.

9.Insurance protects your business from financial loss or any liabilities in case a business partner dies.

10.It can contribute towards maintaining a familys life style when one contributing partner suddenly dies.

Insurance is vital to good financial planning and security but you would need to assess your personal risk and long term commitments. Insurance stands a person in good stead throughout life and can be used in case of emergencies during a life time by requesting a withdrawal or loan.

Term Life Insurance Rates – The More You Know The More You Save

If youre in the market for a term life insurance policy, here are a few money saving tips to help you keep the premiums down.

1.Buy when you are young healthy: Life insurance rates, although they contain fees, and a myriad of expenses, are primarily based upon the statistical chances of a person dying in a given year. Insurance companies use their own experience plus the statistical information collected by the government. The statistics are used to calculate the yearly cost of death for each 1,000 of life insurance benefit. As people grow older, the chances of dying increase. At first the increase is slow up until middle age, and then the chance of death increases more rapidly. As the chance of death rise, so do the premiums.

2.Quit smoking: Smokers premiums are nearly three times as expensive as non-smokers. Staying away from cigarettes a week or two before your company physical wont do. Urine tests will detect traces of nicotine (yep, this means chewing tobacco too). Most companies require you to be smoke free for a minimum of one year. Some companies require two years.

3.Lose weight: Companies dont charge by the pound, but you may be charged more if your weight exceeds a certain level.

4.Buy direct: The internet has made it easy to shop around for life insurance policies directly. By eliminating the middle person, you save on salespersons commissions which are built into the policy premium.

5.Healthy people dont need guaranteed issue policies: People with medical conditions may want to purchase guaranteed issue policies. These policies do not require a medical exam and tend to have higher premiums. The company is taking more of a risk because they dont know your true medical condition. However, if you are healthy, take the exam. It will prove that you are a good risk and your rates will be lower.

Term Life Insurance – Most Times It’s All You Need

Term life insurance is a temporary life insurance covering specific period of time. In this type of policy the insured or the owner pays a premium for a period. The insurance company provides monetary benefit to the beneficiary in case of death of the insured during that period. It is the cheapest type of life insurance available to the general public. Usually the benefit received on death of the insured is income tax free.

There are four parties in term life insurance. The owner is the one who pays the premium. The Insured is the one on whose death, a death benefit(face value) will go to the beneficiary. The beneficiary is one who will receive the proceeds of insurance on death of the insured. The insurer is the company providing the insurance. Premium is the monthly or periodic payment made by the owner to the insurance company.

For instance, Amanda pays monthly 50 pounds to ABC Company for insuring the life of Bill (her husband) for a period of 10 years. In case Bill dies during the 10 years, ABC company will pay 6000 to Jack (son of Bill and Amanda). Here the insured is Bill, the owner of the policy is Amanda, the beneficiary is Jack and the insurer is ABC Company. The premium is 50 and the face value of the insurance is 6000. In case Bill does not die during the 10 years, ABC Company will not be liable to pay any money to any of the parties involved. Often the owner and the insured are same. That is a person buys a policy to cover his own death and nominates a beneficiary.

Term life insurance is a legal contract with terms and conditions and assumed risks. Sometimes there are special provisions like suicide terms wherein on suicide of the insured there is no benefit accrued to the beneficiary. Term life insurance is based on two concepts, theory of diminishing responsibility and Buy Term and Invest the Difference (BTID). In Term life insurance the responsibility or liability of the insuring company reduces as the policy reaches its maturity. Term life insurance is the cheapest type of insurance policy available because there is no cash value at the end of the period. Studies have shown that the mortality rate in term life insurance policies is as low as 1%. Hence the concept of BTID. Rather than going for permanent life insurance (where on the expiry of period the owner will accrue some cash benefit and there is a savings component in it) it is considered cheaper to buy term life insurance and take care of the savings components by investing in other areas. With the present market giving good returns on investment, buying a term life insurance is a more attractive option than permanent life insurance. Term life insurance is available for a period of 5, 10, 20 years etc. As the age of the insured increases the premium increases. The premium is calculated based on mortality rate which is usually dependent on age, sex and whether the person uses tobacco. Most companies provide annual renewable term where in the term can renewed annually however the premium increases annually.

Insurers treat the non-disclosure of information on an application form very seriously indeed, and it is the most common cause for the rejection of a life or critical illness insurance claim. This true story explains that the situation isnt always black and white, and demonstrates the severity of the penalty. We have changed some details to protect the anonymity of the policyholder.

Ms W had to have an operation to eradicate cancerous lymph nodes from her groin, and immediately fell ill after surgery with an infection she picked up in hospital. Critically ill, she had already made a claim on her critical illness insurance, however she received some unexpected bad news. Her claim was rejected and she was not going to receive the 200,000 she was insured for. How did this happen? Read on so we can explain.

June 2001 Ms W went to see her doctor about an area of flaky skin on her back, she assumed it was something like eczema. Her GP wanted a specialist to have a look, and made a referral to a dermatologist. Before the appointment arrived, the patch of flaky skin cleared up, so Ms W cancelled the appointment, thinking no more about it. She did not imagine that it was anything serious, and the GP had not given her the impression that there was anything to worry about.

August 2001 a sales representative from Ms Ws life insurer, Standard Life, called for a routine sales visit. Ms Ws circumstances had changed and she now had a young family depending on her. The sales rep suggested taking out a critical illness insurance policy, and she readily agreed. Ms W took out 200,000 worth of critical illness insurance.

The sales representative talked Ms W through the application form, filling in the answers on her behalf. When they came to the section about any incidences of referral from a GP, Ms W was unsure what the question meant, and asked the sales representative for clarification. According to Ms W, the sales rep told her that she only needed to mention a referral if it related to a serious matter. Ms W didnt think it was worth mentioning the GP referral for the flaky skin, since she thought it was probably just eczema. She didnt mention it so it didnt go on the form. Ms W signed the form after completion and she applied for the Standard Life policy believing that she had provided all the required information.

Ms W soon received notification that she was insured for 200,000 in case she developed a critical illness.

Two years later Ms W learnt that she had skin cancer, and major surgery quickly followed to try and remove the cancer. Ms W naturally made a claim on her critical illness policy, for which she fully expected to receive a 200,000 payout.

Soon after, Ms W received the rejection letter from Standard Life the claim was rejected on the grounds of reckless non-disclosure. As far as the insurer was concerned, Ms W had withheld information on the application form, and this had invalidated her claim.

As you no doubt have realised, Ms W should have mentioned the GP referral to a dermatologist and her failure to mention it resulted in a severe penalty. How could she have made such a mistake?

Two major errors were made:

1.When Ms W was asked to give details of any referrals she asked the sales rep what kind of referrals they meant. She was advised that she only needed to mention referrals relating to serious conditions. This advice was incorrect. The question asked for details of all occasions her GP had referred her for tests or treatments. ALL OCCASIONS means ALL whether they were thought to be serious or not. The insurance company needs to know absolutely everything they ask for on the application form, and Ms W unfortunately did not provide that, thanks to the sales reps advice.

2.The GP did not give Ms W any indication that the flaky skin could be something serious, a fact that the GP stood by later. Ms W did not realise that the skin condition could be anything other than eczema, and so when told that she only needed to give details of referrals relating to serious conditions, she truly believed that her dermatologist referral was not worth putting on the form. She made this decision based on advice given by the sales rep, and it was a genuine mistake on her part.

Taking the above story into account, we think that Standard Life should realise that Ms W made an honest mistake, and did not deliberately withhold any information. The sales rep did not give the right advice, and Ms W followed that bad advice in good faith. It wasnt her fault, and Standard Life should relax the penalty in this particular case.

Make sure it doesnt happen to you

Filling out a life or critical illness insurance application form has to be taken very seriously indeed. You must read every single question and answer each one providing all the necessary information and detail. Withholding information is not an option, dont be tempted by the thought of cheaper premiums because on making a claim, you will be found out and the claim will be invalid. Dont take that risk!

Hopefully, Standard Life will see that Ms W did not deliberately mislead them, and they will give her the payout she deserves.

People that do deliberately mislead the insurers do deserve what they will eventually get nothing.

NB: Standard Life rejects 5%, Friends Provident rejects 15% and Legal & General rejects 16% of all critical illness claims because of policyholders withholding information (whether deliberately or not). The insurance industry realise that they need to do something to address the situation, and are currently developing new ways to get information from applicants, and to publicise the severe penalties for not providing full and accurate information.

According to one of the largest UK life insurance companies, just 1% of life policies are written in trust. That is disgraceful and reflects poorly on the financial industry.

Let’s explain.

If your life insurance policy is Written in Trust then, in the event of a claim, the insurance company pays out directly to the beneficiaries you name on the policy. The significance of this is easily missed.

It means that if the policy is Written in Trust, the proceeds from the policy never form part of your legal estate and are not subject to Inheritance Tax. The importance of this is illustrated by the following figures:

Take Mr A. He’s a widower and wants to leave everything equally to his two sons. He owns his home which is currently worth 245,000 with a 10,000 outstanding mortgage. His investments are valued at 52,000 and his car and other chattels are worth 18,000. He also owns a life insurance policy for 100,000 which is not written in trust. We assume that the costs of administering his estate and obtaining probate would be 5,000.

If Mr A were to die now, his estate would be worth 400,000 less Inheritance Tax. Inheritance Tax is currently levied at 40% on the value of his estate over and above 275,000 that means that the taxman will walk off with 50,000 and his sons would each receive 175,000.

Now lets assume exactly the same figures except that in this case the life insurance policy is Written in Trust with Mr A’s sons as equal beneficiaries. Because the life insurance company pays out directly to his sons, they each receive 50,000 straight away and non of the money is included in Mr A’s estate. This means that his estate is now worth 300,000 and the taxman can only walk away with 10,000. Each of his sons receives 20,000 more and tax-free!

So simply by signing a few forms, Mr A saves 40,000 tax!

Is there a catch? No all the documentation is standard and is provided totally free of charge by the life insurance company. Your broker through whom you buy the policy, should complete the documentation for you, again free of charge. All you have to do is give the details of the beneficiaries to the broker and sign the form. Solicitors are not required. In the event of a claim, the life insurance company then has to pay out directly to the beneficiaries. Job done! Poor Mr Taxman!

Even if your policy is designed to repay a mortgage, it should be Written in Trust for your partner. Then, rather than your estate receiving the money and using it pay off the mortgage, the money can be paid directly to your partner. This saves legal delays, solicitor’s and probate fees and loads of hassle. Your partner can then use the money to personally pay off the mortgage. Whether this also saves you Inheritance tax will depend on the value of your estate and how you have structured your Will.

So we believe that a life insurance policy Written I Trust is a win win situation. And there aren’t many of those around these days! We can’t see any drawbacks.

Bye the way, no matter what you decide to do, always ensure that you have an up-to-date Will.

Online Life Insurance Protection How Much Do I Need?

There are a lot of people getting quotes for life insurance online. The quotes requested are usually for standard amounts of 50,000 to 500,000. The amounts requested often indicate that most people have not taken the time to calculate the amount of life insurance that they need. This often leads to early policy terminations because a real need was not established at purchase. It is very helpful to determine actual needs and then purchase amounts accordingly.

Basic Needs Purchase an amount of life insurance to cover the basics.

1.Final Expenses This your basic burial expense need. Choose an amount and enter it into a calculator.

2.Mortgage Balance Add your mortgage balance to the final expense amount.

3.Short Term Debt Add your entire installment loan and credit card balances to your final expense and mortgage balance totals.

Now you can purchase a basic need life insurance policy amount based on actual needs.

Additional Income Needs The next level of a needs based plan might include a life insurance amount to replace income during an adjustment time period of your choice. You may want to leave your beneficiary a total of five years of your current income in the event of your death to allow your family the time needed to find other sources of income. You can now add this income need to the basics need amount to see if combining the two will fit into your budget.

Educational Needs You can also purchase an amount of Life insurance for an educational fund. You can estimate future college costs based on inflation and then multiply the amount by the number of children in your household.

These are a just a few basic needs and reasons for the purchase of life insurance. It isnt that difficult to do a mini-need analysis. You may save yourself some premium pounds because you have taken the time to determine how much life insurance that you actually need instead of purchasing a random amount.