| Understand The Differences - How Does Term Life Insurance Work |
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| Written by Eddie Lamb |
| Sunday, 17 January 2010 21:29 |
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Life insurance can be confusing, but it's one of those necessary evils that everyone should have yet few people understand. The worst thing to do is to ask an insurance agent what the policies are all about because he will of course attempt to sell you whatever he sells. If you need to know how does term life insurance work, read on.
Life insurance can be confusing, but it's one of those necessary evils that everyone should have yet few people understand. The worst thing to do is to ask an insurance agent what the policies are all about because he will of course attempt to sell you whatever he sells. If you need to know how does term life insurance work, read on. Term insurance got its name from the simple fact that the insurance is purchased for a specific period of time, or a term. The term usually runs anywhere from ten to forty years and they go up in five year increments in between. Premiums are lower for young, healthy individuals. Occasionally you might be required to undergo some simple tests like blood work or a urinalysis. Some carriers insist on what they call a cheek swab as well; this checks for some diseases as well as for drugs and tobacco. Your premiums are then primarily based on the results of these tests. Most people even with what could be considered some serious health issues can still be insured but their premiums will increase accordingly. You might also be 'rated'. Being rated puts you in a special category that alerts all insurance companies to the fact that you are high risk. Unfortunately, mistakes can be made and some people are rated who should never have been. If you are rated, you do have the right to have the information corrected. Your doctor can submit documentation showing that you do not have the disease or condition that has caused this rating. It could take a while to have the problem solved, but it's in your best interests to indeed get it corrected. A term policy can be purchased for an entire family, including children. This is a significant improvement over cash value insurance where each person needs to have a separate policy. A couple in their early 30s for instance, can easily get a policy for $250,000 for each, and a rider of $10,000 for the children (all the children combined, not each one!), for about $100 a month. With term insurance you are buying only a death benefit. There are no savings or investment plans attached to your life insurance, and that's the way it should be. There is no reason to mix the two! Should you die during the time the policy is in effect, your beneficiaries will be paid the face value of the policy immediately. Parents are sometimes hesitant to have their children covered, however, unexpected deaths happen all too often, and many families find themselves in financial despair when they can't even pay for their child's funeral. This is exactly what the child rider is there for. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Investing in life insurance can be frustrating if you're not 100 percent sure what you are searching for or if you have no idea where to find it. If you're in the market for insurance, you're undoubtedly thinking, "How does term life insurance work?". Whole life vs term life insurance info! |