Convertible Term Life Insurance Rates

Considering purchasing convertible term life insurance? How exactly does a convertible term life insurance policy work? Is it possible to find a cheap convertible term life insurance policy? These are all important questions to ask and to understand the answers to before you decide to make the important decision of which type of life insurance coverage to buy.

At the time of deciding what type of life insurance to buy, a person must know every single type offered in the market in order to truly make the best choice for their specific coverage needs. It is true that perhaps many companies simply refer to their policies as term or permanent life insurance, but a person must know that there is much more to that and such is the case of convertible term life insurance. In this article you will be able to know what convertible term is and the many things associated with this type of life insurance.

What Exactly Is Convertible Term Life Insurance?

Life insurance is perhaps easily understood because it simply is a contract between a person and an insurance company. The contract simply states that the person must pay monthly premiums for a certain period of time in exchange for a death benefit paid to the beneficiary in case of the insured’s death.

A term life insurance policy is simply a policy that will cover for a specific period of time, but with a convertible term life insurance policy you will have the ability to transform your policy from a temporary one to a permanent one.

What this means is that if you have a policy for 25 years and you have a convertible term life insurance policy, then you will be able to change the term policy into a whole, universal of variable life insurance policy (depending on the company).

Things To Know At The Time Of Purchasing Your Policy

Like any other product, there are a few things that a customer must know in order to make the convertible life insurance experience a successful one.

Health and Family History: At the time of applying for a policy, whether you are doing it online or in person at a local agency; make sure to have some general information about your medical history. Although companies have the right to access your files when you apply for a policy (with your permission that is), most of the times they will ask you questions about your health and family history. The more prepared you are to answer these questions, the easier the quoting process will be.

Amount and Duration of the Policy: You must also have an idea of how much life insurance you wish to buy at the particular time. The reason for this is that with term life insurance policies a person must choose an amount at the time of getting the policy. There are tools online or that the company has that will help you get the amount you will more than likely need. It is also important to understand that the particular amounts change from company to company. Also, make sure that you know the amount of time you want the policy to last. Some common ones include 15, 20, 25 and even 30 years.

The Beneficiary: Last but not least it is important to be completely certain of whom you want your beneficiary to be. The reason for this is that many people actually don’t know at the time of signing the policy and just put the first person in mind. However, many insurance companies are actually very strict when it comes to beneficiaries and they wont let a person make a change unless they fill out the appropriate paperwork. Nevertheless, it is important for a customer to know the company and their stand when it comes to particular beneficiary changes.

Lower Premiums Compared To Other Types Of Policies

Compared to many of the other types of policies, the convertible term life insurance policies give the customer a better choice. The reason for this is that a person will have the main option of converting the term life insurance to a permanent one or of simply letting the policy expire in their own hands. Having a term life insurance first also helps a lot, simply because term life insurance has lower premiums than a permanent life insurance policy.

The difference for these cheaper premiums is simply that with a term life insurance policy, the death benefit is not guaranteed to the beneficiary (particularly because the insured can still be alive at the end of the policy). Because of this reason, a person that chooses the option of having a convertible life insurance policy will have the great option of paying low premiums at first.

Medical Examinations

Another good thing about convertible term life insurance policies is that they allow a person to convert regardless of the medical condition and health of the insured. If the person in the policy chose the option of having a convertible term life insurance policy and they have paid premiums at the right time, then they have by law the right to extend their coverage if they choose to.

It is also important to highlight that this change in coverage must be made without the insured being forced to take a medical examination. The freedom of continuing the coverage regardless of everything and not having the chance of being denied might be the reasons why this insurance option is so popular nowadays.

No Premium Increases For Medical Problems

The last thing worth talking about when it comes to convertible life insurance policies is that at the time of changing your policy you cannot be charged any additional premium for any medical problems that you may have. It is important to highlight that I’m not referring to the fact that your premiums will not go up in value, because when converting from term to permanent there is always a chance of that. What I’m referring to is that at the time of converting your term life insurance to a permanent one by law you are protected against a raise in premium based on a medical condition.

No One Policy Is Right For Everyone

It is important to note that this type of plan is not for everyone, because some people just rather have a permanent policy right away or some others just want to be covered until they get retired. However, this might be exactly what some people are looking for simply because it starts as perhaps the low cost choice.

Compare Quotes To Find The Best Value

Compare the prices of regular life insurance quotes against the prices of convertible term life insurance quotes to find the best value. If you want the freedom of having a term policy and being able to convert it in the near future to a permanent life insurance plan that covers you for life then go ahead and start shopping around for your convertible life insurance plan!

Everything About Life Insurance!

I want to start off this 2010 with an article regarding Life Insurance. Many people find this topic morbid but believe me when I say this contract is as important as a Will and should be taken just as seriously as health insurance. Due to the length in details of this article I have provided chapters for easy reading. I hope this will educate you on Life Insurance and the importance of its necessity. (Note: For better understanding “You” is the policy owner and the insured)

Chapters:

1= Introduction

2=When/If you have Life Insurance already

3= Difference between a Insurance Agent and Broker

4= Types of Policies

5= What are Riders and popular types of Riders

6= The medical exam

1) About general Life Insurance:
This is a contract between you and an insurance company to pay a certain amount (the premium) to a company in exchange for a benefit (called the Death Benefit, face amount, or policy amount) to the beneficiary (the person you want to get paid in the time of your death). This can range based on the type of policy (which will be discussed momentarily), your health, your hobbies, the Insurance company, how much you can afford in premiums, AND the amount of the benefit. It sounds overwhelming but it is not if you have the right agent or broker.

Now many people can say that Life Insurance is like gambling. You are betting that you will die in a specific time and the insurance company bets you won’t. If the insurer wins, they keep the premiums, if you win…well you die and the death benefit goes to the beneficiary. This is a very morbid way of looking at it and if that is the case you can say the same for health insurance, auto insurance, and rental insurance. The truth is, you need life insurance in order to ease the burden of your death. Example 1: A married couple, both professionals that earn very well for a living have a child and like any other family has monthly expenses and 1 of the couple has a death. The odds of the spouse going back to work the next day is very slim. Odds are in fact that your ability to function in your career will lower which RISK the cause of not being able to pay expenses or having to use one’s savings or investments in order to pay for these expenses NOT INCLUDING the death tax and funeral expenses. This can be financially devastating. Example 2: lower middle income family, a death occurs to 1 of the income earners. How will the family be capable of maintaining their current financial lifestyle?

Life insurance is about the ability of lowering the risk of financial burden. This can be in the form of simple cash or taxes via estate planning.

KEY Definitions:

The Insured: The person that is covered by the insurance company (He/She does NOT have to the policy owner)

The (policy) Owner: The one that pays the premium, controls the beneficiary, and basically owns the contract (Does NOT have to the insured…hope you understand it can be either/or).

Face Amount: Also known as the death benefit. The amount to be paid to the beneficiary.

The Beneficiary: Is the person/persons/organization who will receive the face amount (death benefit)

2) When/If you have Life Insurance:
First, you should review your beneficiaries once a year and your policy approximately once every 2-3 years. This is free! You need to make sure the beneficiaries are the people/person you want to get paid! Divorce, death, a disagreement, or anything of the sort can make you change your mind about a particular person to receive the benefit so make sure you have the right people, estate/trust, AND/OR organization (non-profit preferably) to receive the benefit. Furthermore, you need to review every 2-3 years because many companies can offer a lower premium OR raise the benefit if you renew your policy or if you find a competitor that sees you have been paying the premiums may compete for your business. Either way, this is something you should consider to either save money or raise the policy amount! This is a win-win for you so there should be no reason not to do this.

3) Life Insurance Agent or Broker, what is the difference?:
The major difference is an Agent is usually an independent sales man that usually works with different insurance companies in order to give the client the best possible policy while the Broker works for a particular company. My personal advice: always choose an Agent. Not because I am one myself BUT because an agent can look out for your benefit by providing different quotes, types, riders that are available (explained later), AND pros/cons regarding each insurance company. If you don’t like a particular insurance company, tell the agent and he should move on to the next carrier (if he persist for some odd reason, fire him). Buyers BEWARE: The Agent should get paid by the carrier that is chosen, not by you specifically. If an Agent asks for money upfront for anything, RUN! There are also Insurance consultants that you pay but to keep things simple, see an Agent. Consultants and Agents are also great in reviewing current policies in order to lower premiums or increase benefits.

4) Types of Policies:
There are 2 main categories: Term and Permanent Insurance. Within each of the 2 categories have sub-categories. I will explain them at a glance in order for you to make the best possible choice for you and your loved ones. Remember, you can have estate/trust or a organization as the beneficiary. (Note: There are even more sub-sub-categories within these sub-categories but the difference are so small and self explanatory that I have not included it in this article. Once you speak to an agent you will have enough knowledge by this article that you will know what questions to ask and know if you agent is right for you).

Term Insurance: A temporary policy in which the beneficiary is paid only upon death of the insured (you) within a specific time period (hence the word “Term”). Term Insurance is usually less expensive with a smaller death benefit. Some do not require medical exams BUT expect to pay a higher premium since the risk of the insurance company is unknown. Also, term insurance normally does not accumulate cash value (explained in permanent insurance) but can be purchased on top of your permanent policy (for those that may have coverage already):

Convertible Term: Ability to convert policy to permanent. There are some REALLY GOOD policies that require no medical exam, driver history, or hazardous avocations at a certain point in order to convert to permanent coverage guaranteed with all the benefits that permanent insurance policies has to offer.

Renewable Term: Able to renew a term policy without evidence of insurability.

Level Term: Fixed premiums over a certain time period than increases (great for those that are young adults and expect within 10 years to have a increase in pay).

Increasing/Decreasing Term: Coverage increases or decreases throughout the term while the premium remains the same.

Group Term: Usually used for employers or associations. This covers several people in order to reduce premiums. (Great for small business owners)

Permanent Insurance: Just as the name states, this provides coverage throughout the lifetime of the insured. This also builds cash value which is fantastic for tax purposes because if you loan out money to yourself using this cash value there are no tax implications. Few policies may have in general withdrawal tax-free. However in most cases, If you withdraw the cash value you pay the only the taxes on the premiums (the amount that grew) which is fantastic. Just make sure your agent knows not to have the cash value grow larger than the death benefit otherwise it is subject to 10% taxes! Surrender charges may also apply when you withdrawal so PLEASE consult with an agent who can assist you with these details. You should consider Permanent Insurance if you have a family and don’t mind an increase in premiums (amount you pay) by a few dollars compared to term.

Traditional Whole Life: Pay a fixed amount of premium in order to be covered for the insured’s entire life which includes accumulating cash value.

Single-Premium Whole Life Insurance: Whole life insurance for 1 lump sum premium (usually that 1 lump sum is very large in order to get a great death benefit).

Participating Whole Life Insurance: Just like Traditional Whole life except it pays you dividends which can be used as cash OR pay your dividends for you! There is no guarantee that you will be paid the dividends, this is based on performance within the insurance company.

Limited Payment Whole Life Insurance: Limited payments for whole life but requires a higher premium since you are in fact paying for a shorter amount of time. This can be based on payment amounts (10, 20, 30, etc payments) or a particular age (whole life is paid up at age 65, 75, 85, etc).

Universal Life Insurance: Flexible premiums with flexible face amounts (the death benefit) with a unbundled pricing factors. Ex: If you pay X amount, you are covered for X amount.

Indexed Universal Life: Flexible premium/benefit with the cash value is tied to the performance of a particular financial index. Most insurance companies crediting rate (% of growth) will not go below zero.

Variable Life Insurance: Death Benefit and cash value fluctuates according to the investment performance from a separate account of investment options. Usually insurance policies guarantee the benefit will not fall below a specified minimum.

Variable Universal Life Insurance (also called Flexible Premium Variable Life Insurance & Universal Life II/2): A combination of Variable and Universal which has premium/death benefit flexibility as well as investment flexibility.

Last Survivor Universal Life Insurance (also called Survivorship or “Second to die” Insurance): Covers 2 people and the death benefit is only paid when both insurers have died. This is FANTASTIC and somewhat a necessity for families that pay estate taxes (usually High-Net-worth individuals).

5) Life Insurance Riders, what is it and why is it very important:
Rider is the name of a benefit that is added to your policy. This provides special additions to the policy which can be blended and put together. There are SO MANY types of riders that I would have to write a different article regarding Riders (and insurance companies add new types of riders often) but I want to at least name the most popular (and in my opinion, the most important) that you should highly consider when choosing a policy. Riders add to the cost of the premium but don’t take riders lightly; it can be a life saver!

Accidental Death Benefit Rider (AD&D): Additional death benefit will be paid to the beneficiary if you die from a result of an accident (ie: Car accidents, a fall down the stairs). This is especially important if the insurer travels often, relatively young, and has a family. Please note: You can buy AD&D Insurance separately.

Accidental Death & Dismemberment Rider: Same as above BUT if you lose 2 limbs or sight will pay the death benefit. Some policies may offer smaller amounts if losing 1 eye or 1 limb. This is great for those that work with their hands.

Disability Income Rider: You will receive a monthly income if you are totally and permanently disabled. You are guaranteed a specific level of income. Pay attention to this detail, depending on the policy it will either pay you depending on how long the disability lasts OR time frame of the rider.

Guaranteed Insurability Rider: Ability to purchase additional coverage in intervals based on age or policy years without having to check insurance eligibility.

Level Term Rider: Gives you a fixed amount of term insurance added to your permanent policy. This rider can add 3-5 times the death benefit or your policy. Not a bad deal!

Waiver of Premium Rider: If you become disabled which results to the inability to work/earn income, the waiver will exempt you from paying the premiums while your policy is still in force! There is a huge gap between policies and insurance companies so the devils in the details with this rider.

Family Income Benefit Rider: In case of death of the insurer, this rider will provide income for a specific time period for your family.

Accelerated Death Benefit Rider: An insurer that is diagnosed with a terminal illness will receive 25-40% of the death benefit of the base policy (The decision is made between the insurer and the insurance company). This will lower the death benefit however depending on your finances or living lifestyle, this rider should not be taken lightly and should seriously be considered.

Long-Term Care Rider: If the insurer’s health compels to stay in a nursing home or receive care at home, this rider will provide monthly payments. Please Note: Long Term Care insurance can be bought separately for more benefit.

6) The Medical Exam:
This section is not to scary you away but to mentally (and possibly physically) prepare you for the medical exam so this way you know what to expect and can get the lowest possible premiums while receiving the highest possible death benefit. This really shouldn’t be a concern if you work out regularly and maintain a healthy eating habit (notice I said habit and not diet. Diets don’t work for long term).

The exam is mandatory for most insurance policies. Many term insurance do not require one but expect a low death benefit and/or higher premium. The idea of the exam is not just to see if you’re insurable but to also see how much they will charge the insurer/policy owner. The exam is done by a “paramedical” professional that are independent contractors hired by the insurance company who either come to your home or has an office where you/the insurer visit. They are licensed health professionals so they know what to look for! In very few cases the insurance company may ask for an “Attending Physician Statement (APS)” from your doctor. This must be provided by your doctor and NOT copies by you. TIP: The “paramedical” job is to give the insurance company a reason to increase your premiums so don’t give any details that are not asked.

First part (either called Part 1 or Part A) is complete by the Agent or by you. Part 2/B is the paramedical or physician portion. The best bet is to have your agent contact a paramedical that specializes in mobile exams for an easier exam for you. Paramedical will contact you to schedule an appointment. The exam is not optional so it’s not a matter of yes or no but when and where. This entire exam will cost you nothing except time so make the time, life insurance is important!

The paramedical/physician will take your medical history (questions), physical measurements of height and weight, blood pressure, pulse, blood, and urine. Additional tests will vary based on age and policy amount (yes, the higher the death benefit = the more tests that must be provided). Now if the policy is substantial, the insurance company may not send a paramedical but require an actual Medical Doctor to exam you. Of course, this is chosen by the insurance company so remember my tip earlier! This exam may even include a treadmill test and additional crazy exams in order to see if you qualify for that substantial amount and low premium. On the flip side, if you choose a low insurance policy, you will just have a paramedical doing simple tests that mentioned earlier with no additional exams.

What they are looking for: Paramedical/Physicians are looking for health conditions that may shorten your life. Remember, insurance companies are here to make a business and if you’re a liability then it might be a risk they do not want to take or raise the premium to make the risk tolerable. Blood and urine is taken to see the following:

– your antibodies or antigens to HIV

– Cholesterol and related lipids

– Antibodies to hepatitis

– Liver/kidney disorders

– Diabetes

– Immunity disorders

– Prostate specific antigen (PSA)

– Drug tests such as cocaine

The Results: They are sent directly to the insurance company’s home office underwriters for review. Many times you can request (must be written request) to receive a copy of the results however many insurance companies will automatically do this. Many times they will find abnormalities but it’s usually not a concern and just speak to your medical professional for a follow up (remember: the insurance company will look at these exams with a “fine tooth cone” in order to see what the risk are). The underwriters will look at the exam results and the application (remember part 1/a? well, now they want to see if your also lying) and determine the premium amount. Smokers pay more; any nicotine in your system will consider you a smoker, even if it is just socially.

The premium is determined by a category that you fit in. This really depends on the insurance company on how they factor but the general rule is if you are a higher risk, you pay higher premium. If you are standard risk, you will pay a standard premium, and if you are a preferred risk, you will pay a low premium.

You can decline the policy after you receive the final quote after the exam but do remember this: All results will become part of the MIB group’s database (Medical information Bureau). This is a clearinghouse of medical information that insurance companies use to store information after you apply for Life/Health/Disability Income/Long Term care/Critical Illness insurance. So for seven years it will be on database. You can receive a free report annually (like a credit check) at their website which I included at the bottom of this article.

Now that you know practically everything there is to know about life insurance. I hope you realize how important it is. It may seem like a lot but the hardest part is simply choosing what type of policy is right for you. This can be done with the help of your Agent. In the end, everyone is different and everyone should analyze their own situation and need for the beneficiaries. If you have even the slightest concern for a loved one regarding what will happen if you was no longer with us then you should consider life insurance. There truly is a feeling a relief once you know you and your loved ones are covered regardless of how much you or that person makes. For many that feel that their loved ones don’t need the death benefit due to whatever the case may be (“they earn enough money to survive” is the biggest reason I hear against life insurance), this can be a simple last gesture of “I love you” or appreciation for them being part of your life.

Life Insurance: Back to Basics

Life Insurance: A Slice of History

The modern insurance contracts that we have today such as life insurance, originated from the practice of merchants in the 14th century. It has also been acknowledged that different strains of security arrangements have already been in place since time immemorial and somehow, they are akin to insurance contracts in its embryonic form.

The phenomenal growth of life insurance from almost nothing a hundred years ago to its present gigantic proportion is not of the outstanding marvels of present-day business life. Essentially, life insurance became one of the felt necessities of human kind due to the unrelenting demand for economic security, the growing need for social stability, and the clamor for protection against the hazards of cruel-crippling calamities and sudden economic shocks. Insurance is no longer a rich man’s monopoly. Gone are the days when only the social elite are afforded its protection because in this modern era, insurance contracts are riddled with the assured hopes of many families of modest means. It is woven, as it were, into the very nook and cranny of national economy. It touches upon the holiest and most sacred ties in the life of man. The love of parents. The love of wives. The love of children. And even the love of business.

Life Insurance as Financial Protection

A life insurance policy pays out an agreed amount generally referred to as the sum assured under certain circumstances. The sum assured in a life insurance policy is intended to answer for your financial needs as well as your dependents in the event of your death or disability. Hence, life insurance offers financial coverage or protection against these risks.

Life Insurance: General Concepts

Insurance is a risk-spreading device. Basically, the insurer or the insurance company pools the premiums paid by all of its clients. Theoretically speaking, the pool of premiums answers for the losses of each insured.

Life insurance is a contract whereby one party insures a person against loss by the death of another. An insurance on life is a contract by which the insurer (the insurance company) for a stipulated sum, engages to pay a certain amount of money if another dies within the time limited by the policy. The payment of the insurance money hinges upon the loss of life and in its broader sense, life insurance includes accident insurance, since life is insured under either contract.

Therefore, the life insurance policy contract is between the policy holder (the assured) and the life insurance company (the insurer). In return for this protection or coverage, the policy holder pays a premium for an agreed period of time, dependent upon the type of policy purchased.

In the same vein, it is important to note that life insurance is a valued policy. This means that it is not a contract of indemnity. The interest of the person insured in hi or another person’s life is generally not susceptible of an exact pecuniary measurement. You simply cannot put a price tag on a person’s life. Thus, the measure of indemnity is whatever is fixed in the policy. However, the interest of a person insured becomes susceptible of exact pecuniary measurement if it is a case involving a creditor who insures the life of a debtor. In this particular scenario, the interest of the insured creditor is measurable because it is based on the value of the indebtedness.

Common Life Insurance Policies

Generally, life insurance policies are often marketed to cater to retirement planning, savings and investment purposes apart from the ones mentioned above. For instance, an annuity can very well provide an income during your retirement years.

Whole life and endowment participating policies or investment linked plans (ILPs) in life insurance policies bundle together a savings and investment aspect along with insurance protection. Hence, for the same amount of insurance coverage, the premiums will cost you more than purchasing a pure insurance product like term insurance.

The upside of these bundled products is that they tend to build up cash over time and they are eventually paid out once the policy matures. Thus, if your death benefit is coupled with cash values, the latter is paid out once the insured dies. With term insurance however, no cash value build up can be had.

The common practice in most countries is the marketing of bundled products as savings products. This is one unique facet of modern insurance practice whereby part of the premiums paid by the assured is invested to build up cash values. The drawback of this practice though is the premiums invested become subjected to investment risks and unlike savings deposits, the guaranteed cash value may be less than the total amount of premiums paid.

Essentially, as a future policy holder, you need to have a thorough assessment of your needs and goals. It is only after this step where you can carefully choose the life insurance product that best suits your needs and goals. If your target is to protect your family’s future, ensure that the product you have chosen meets your protection needs first.

Real World Application

It is imperative to make the most out of your money. Splitting your life insurance on multiple policies can save you more money. If you die while your kids are 3 & 5, you will need a lot more life insurance protection than if your kids are 35 & 40. Let’s say your kids are 3 & 5 now and if you die, they will need at least $2,000,000 to live, to go to college, etc. Instead of getting $2,000,000 in permanent life insurance, which will be outrageously expensive, just go for term life insurance: $100,000 for permanent life insurance, $1,000,000 for a 10-year term insurance, $500,000 for a 20-year term insurance, and $400,000 of 30 years term. Now this is very practical as it covers all that’s necessary. If you die and the kids are 13 & 15 or younger, they will get $2M; if the age is between 13-23, they get $1M; if between 23-33, they get $500,000; if after that, they still get $100,000 for final expenses and funeral costs. This is perfect for insurance needs that changes over time because as the children grow, your financial responsibility also lessens. As the 10, 20, and 30 years term expires, payment of premiums also expires thus you can choose to use that money to invest in stocks and take risks with it.

In a world run by the dictates of money, everyone wants financial freedom. Who doesn’t? But we all NEED financial SECURITY. Most people lose sight of this important facet of financial literacy. They invest everything and risk everything to make more and yet they end up losing most of it, if not all- this is a fatal formula. The best approach is to take a portion of your money and invest in financial security and then take the rest of it and invest in financial freedom.

Ultimately, your financial plan is constantly evolving because you are constantly evolving. You can’t set a plan and then forget it. You need to keep an open eye on your money to make sure it is working hard because that money needs to feed you for the next 20-30+ years that you will be in retirement. You have to know how to feed your money now so that it can feed you later.