Term Insurance is the low-cost, temporary insurance protection. It is generally used to meet a temporary need (example - mortgage protection) or a need for a large amount of insurance at the lowest possible initial price.
The renewal period. If it's possible that you will need your coverage after the first renewal period (after 20 years for 20-year term or after ten years for ten-year term), be sure to compare both the initial premium and the renewal premium and confirm whether the renewal rates are guaranteed at the quoted level. What would happen if your health deteriorated since you purchased your insurance and you still need life insurance - are you locked into high renewal rates?
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Will you have the flexibility to convert your term coverage to permanent at some point in the future? If so, are there any restrictions as to the type of permanent plans you can convert to? Some companies only allow conversions to specific permanent plans and this can work against you. Typically, term products set a maximum age for conversion. Ages vary by company and product. If you don't convert prior to the age specified, you may be left with no coverage once your term insurance expires.
Universal Life works very well for people who have a permanent insurance need and want the flexibility and control to change premium levels, investment options and coverage levels.
Important things to consider when buying Universal Life Insurance:
The guarantees. Be sure you understand what is guaranteed and what is not. Typically, most of the insurance charges are guaranteed in some form, while the investment side of the product has very limited guarantees.
The charges. Look at the full package of charges - not just one of the types of charges. Ask for a total of charges listed year by year, including the surrender charges in case you choose to give up your coverage.
Your tolerance with risk. Because universal life has a flexible investment component, it's more important than ever to be aware of the investment risk associated with the various investment options and that they match your risk tolerance. It's crucial that your representative also understands your tolerance with risk and how you wish to use this investment component. Do you want to take risks with your life insurance policy or should riskier investment vehicles be held separately.
Product illustrations. Insurance representatives often use illustrations to show how the product works. They are not intended to be an estimate of future values or for comparing plans between companies.
Speak with a Qualified Professional today to help choose the right Universal Life Insurance plan for you.
Not thinking of Term Life Insurance?
Participating insurance works well for people who have a long-term focus and for people who would rather have the investment component of their policy actively managed by investment professionals. Also, the investment mix is long-term in focus and lower risk than policies which utilize a significant portion of investments in equity-linked accounts. It is primarily invested in high quality bonds and mortgages. The long-term focus and high quality of the assets results in a relatively stable return over the long run.
This type of insurance typically has a guaranteed basic premium, guaranteed basic coverage and guaranteed cash values.
The initial premium for participating insurance is generally higher than for similar plans that don't offer dividends, but the net cost after receiving dividends is expected to be lower over the long term. There are a variety of ways to use the dividends. For example, dividends can be paid in cash or can be used to buy additional insurance on a tax-advantage basis.
Speak with a Qualified Professional today to help choose the right Participating Permanent Life Insurance plan for you.
So, to take such pre-cautions in life, contact us for a free consultation on a Life Insurance package for you and your loved ones.