If you are considering term insurance for your business, it is important to know the pros and cons. The Term life insurance, also called term assurance or permanent life insurance, is simply life insurance which provides coverage for a defined period of time, usually the term agreed upon.
The value of the policy is determined at the time of signing the contract, usually based on an assessment of the person’s future income. The policy can either be renewable, meaning you can renew it, or non-renewable, meaning that you can’t renew it because the coverage is already in place.
Many people purchase term life insurance policies as investment vehicles.
When purchasing a term insurance policy, there are many things to consider. How much coverage do you need? Will the additional benefits of inflation make your cost more than the amount you paid for the initial policy? How will you use the benefits? What is your overall risk of death?
One of the main advantages of purchasing a level term insurance policy is the stability of premium payments. You are locked into a level premium for the entire term of the policy. However, this premium may be adjusted each year.
It is important to understand that most level term policies also have renewal provisions, which allow the company to increase the payments if economic conditions change, such as rising interest rates. This may result in additional expense, but it may be one of the safer ways to insure your business.
Level term policies are not renewable. Once the term has expired, no premiums will be paid to extend the term. Unlike a term policy, which allows for flexibility, level term coverage contracts cannot be changed mid-term. The only option is to renew the policy and pay the balance in full at the end of the term.
A good reason to purchase insurance with an existing company is to receive the lowest overall premiums. However, there are situations when purchasing insurance with an existing insurer may result in a decrease in overall premium.
If you currently have an existing health issues that could possibly disqualify you from certain policies, or if you have been deemed a higher risk, your insurance company may reduce your premiums.
Also, if you previously had an open-heart surgery policy, your company may reduce your premiums. These types of changes may occur even if you have remained a low or high risk driver.
When comparing insurance companies make sure you take the time to research their overall policies. Examine their policies for what type of coverage they offer, and what specific coverage is offered for your individual and family needs.
For example, compare insurance companies that offer Standard or Preferred, Guaranteed Renewable or Voluntary Recourse plans. Each plan differs slightly from the other, and choosing the right policy can mean the difference between financial security and financial risk.
For example, most term policies require no medical exam, but some policies do require a medical exam for the Newborn Children of the Policyholder.
Another way to save money is to get a Term Life Insurance quote that does not require a medical exam. Once again, be sure to compare the different policies that are being presented to you. Most Term Insurance quotes require a medical exam, but some companies do not.
In addition, most Term Insurance policies require that you pay a fee upfront for the entire length of the coverage, regardless of the number of years you sign up for the coverage. If you are interested in a long-term policy that will provide you with a steady cash value, this may not be a factor for you.
One reason why people purchase insurance at the end of the term is to build cash value. Most policies will give you an initial premium payment, which will need to be paid in full before the policy’s full maturity date.
Therefore, at the end of the term you will have some cash tied up in your policy. During the term of the policy you can use this cash on any number of things.
Some people choose to use their policy’s interest on a home or a car, while others use the cash value to make payments toward a college education. No matter what you choose to do with the extra premium, be sure that you have weighed the advantages and disadvantages of the policies you are considering.