Fixed Term Insurance

Most people struggle deciding not only on whether they should buy life insurance, but also what type of policy to purchase.

There are so many choices—it can all be a bit overwhelming. This article discusses fixed term life policies, the most common type of term life policies available.

These can be a great options for anyone who is looking to buy a policy for a fixed period of time.

What Is Fixed Term Life?

These policies have set set terms, thus the name fixed term life. The terms usually range from 10 to 30 years and during that time their costs (or premiums) remain level. These policies provide a high level of coverage at affordable prices.

People buy a term life policy to protect their families as they are saving for retirement. No one of course plans to die during your income-earning years, but if that happens, the term life policy is there to help with that income gap until retirement.

With a term life policy, your beneficiaries designated on that policy get a death benefit payout. If you die after the term expires, there is no payout. For example, if you have a 10 year policy and you die in year 12, there is no payout.

Most people up to age 80 can purchase a term life policy and some companies will even write policies until age 85.

Who Is A Good Candidate For A Term Life Policy?

Term life policies are very versatile, so lots of different people purchase them. Today, more people actually buy term life policies than permanent life insurance policies. Why? Because term life policies offer more bang for the buck—you actually get more coverage dollar for dollar than you would on a permanent life policy.

Households are more expensive to run these days. More people have more debt and the cost of living is so high that many people are concerned about leaving their families in a struggling situation should they die. These policies offer great coverage at a great price.

In fact, people at all stages of life choose these policies—young or old, single, divorced or even widowed. Many of these consumers have received great advice that term life can and should be an essential part of any financial plan. Because of that, many people do review their life insurance policies each year as part of the entire financial portfolio. It’s always a good idea to make sure that all of your financial decisions are still in line with your goals in life.

Change in life is inevitable. Children grow up and go out on their own. You might lose your spouse to divorce or death. You might have aging parents to take care of. Depending on your situation, you may need more or less coverage as each year passes.

While there is no “textbook” answer regarding who usually purchases term life, for the most part, they are people under age 60 who are saving for retirement. Most still have kids living at home or other dependents like aging parents.

What can my family spend the life insurance money on?

Life insurance is a way to ensure your family’s well being by providing them cash quickly after you die. This money can be used for anything—burial expenses, debt, mortgage, college funds—really anything. The death benefit payouts are generally income-tax free, so it is very important to have the stability and peace of mind that a term life policy offers you.

Can I get Term Life If I Have Health Issues?

This is a very common question that many consumers have. Heart disease is prevalent in society today, and it is possible to purchase a term life policy even if you have a history of heart disease, so don’t assume you won’t qualify anywhere. Naturally, the cost is higher depending on the specific heart condition, but you can still get coverage.

There are many conditions like stent surgery that still qualify for a standard rate. Other conditions like multiple stents or bypass surgery or heart attack mean a higher rate. Every case is different and every company and rate are different, but many people do qualify even if they have health problems, and that is important for you to know.

Is Fixed Term Life Right For Me?

The best way to determine this is to talk to an underwriting expert. That person can provide you with the best market rates, determine your overall health condition and your future financial goals you’re trying to accomplish by purchasing the policy. Life insurance is a very important aspect of your overall personal financial portfolio and plan, however it has to fit within the budget.
In the end, the only term policy that matters is the one in effect when you die, so it is crucial to keep your budget in mind.

How Much Do Term Life Policies Cost?

Costs vary depending on the length of term you buy and the overall amount of insurance you want to purchase. Your age and your health condition also factor in. The older you are, the higher the rate.  This article provides sample rates if you’re looking for a general cost of life insurance.

The healthier you are, the lower the rate. Other things regarding the relative risk in your life will affect your rate. People who travel more, or have dangerous jobs or dangerous hobbies are considered to be higher risk individuals.

What’s new about Fixed Term Life Insurance?

If you have not been in the market recently, there are three main things that have changed about fixed term life insurance.

First, life expectancy has increased for most Americans.

Therefore, people are living longer and life insurance premiums are going down because of it. If it’s been a while since you have checked rates, you may be in for a pleasant surprise.

Second, due to automatic underwriting, “No-Exam” type policies are on the rise.

Life insurers are able to use a wealth of information to build predictive models. Credit reports, motor vehicle reports, pharmacy checks, information from other insurance companies (MIB), phone interviews and the application itself build a profile about an applicant that is eerily accurate. Therefore, the life insurance company gets a great picture of the client and is less likely to ask for a paramedical exam.

This is great news for convenience, and these cases are usually completed within days whereas traditional underwriting used to take weeks. According to Brian Greenberg of True Blue Life Insurance, for those in good health, companies are offering no exam policies at the same prices as those that require an exam.

Clients are taking advantage of living benefits.

Life insurance is designed to pay a benefit after you die, however what if you needed that money while you were alive due to a serious illness? New fixed term policies allow you to access part of the death benefit while you are alive, and these benefits are called living benefits.

With these living benefits the client needs to be really sick. Whatever the illness, it needs to be severe and life-changing. Also, if you take the money while you are alive then it will not be there when you die, and there are some costs involved.
Things that are covered are triggers like loss of limbs, major burns, Parkinson’s, MS, blindness, paralysis, ALS, major heart attack, cancer or stroke.

In cases where clients are really sick and have a severe diagnosis, how are they going to keep working? This benefit can help pay end of life expenses without dipping into the family’s savings. Or it can build a wheelchair ramp, or take the family on vacation.

Clients do not have to take the option, however it is nice to know those living benefits are available should you need them. They are just one of the best new changes to fixed term life insurance.

How Can I Save Money on my Term Life Purchase?

There are some great ways that you can really save money when you purchase term life insurance.

One of the simplest ways to save money is to pay your premium yearly rather than monthly; it could save you up to 10 percent.

We already mentioned that it’s important to review your life insurance coverage from year to year. As life changes, and you reassess, you may find that you can reduce your coverage because you no longer need such a high death benefit.

One example is when your children are grown and out of the house earning their own money. At that time, maybe you don’t need $2 Million worth of life insurance coverage anymore, maybe $1 Million is the proper amount. Most life insurance companies do allow you to revise your policy once during the fixed term period, and at that point you can adjust your benefits and payments down.

Some clients also extend their payout periods, meaning they elect to pay out any death benefit over several years rather than a lump sum payment. This works for most families because the death benefit is an income replacement, and is typically not needed in a lump sum. Some people have their death benefit go to a charitable organization and would rather pay it out over years than in a lump sum. Some customers save as much as 30 percent just by making this change, so it is definitely worth looking into.

There’s also power in bundling your policies. For example, if you bundle your term life with your home and auto insurance, or even with your business insurance or other life insurance policies, you might save as much as 15 percent..

Improving your health can also improve your rates. If you lose weight or make any other small change that improves your medical situation, it might mean that you pay less for your term life policy. Small changes can mean significant savings over time. If you’re relatively healthy, choose a term life insurance policy that requires a medical exam; you’ll pass it and you also might save as much as 40 percent on your premium. All life insurance rates are based on risk, and you’ll be rewarded for your good health.

This next one might seem counterintuitive, but sometimes buying more coverage can actually save you money. How? Term life policies have price breaks at certain levels. All companies are different, but common breakpoints are $250,000, $500,000 and so on. People who are closer to these “bands” can actually get more death benefit for less money. For example, a $250,000 policy likely has a lower premium than a $240,000 policy. Many people take advantage of “banding” at the advice of their insurance agents, and as a result, save thousands of dollars over the lifetime of their policies.

The younger you are when you buy your policy, the more you will save. As you age, your premium increases about five percent a year, so it pays to purchase when you’re younger. If you wait until your sixties, you can pay 10 percent more. Health declines as we age, so you might pay even more. Get term life while you’re young.

Don’t go with gimmicks, either. There are lots of companies offering seemingly too good to be true deals, and they are. Companies that are promising low rates no matter your age, or policies with no health questions are gimmicks. They usually have very high premiums and very low payouts for death benefits. Work with an independent agent to avoid this pitfall.

What are the next steps?

If you’ve decided that a fixed term policy makes sense for you and your family, the next step is to explore your options with an independent expert. Look for an agent who has experience and works with many different life insurance companies.

He or she will ask the right questions to make sure you get the perfect policy for your needs and budget. After that, you can rest easy knowing if you died tomorrow, your family would be protected because of your planning today.