Term Life Insurance - Understanding Common Clauses and Limitations

One thing many people overlook when comparing quotes on term life insurance is the terms and exclusions attached to each policy. These can have a significant impact if someone ever has to make a claim against the policy. Before you sign up for a policy, make sure you fully understand all of these.

One of the most common ones you will see is what industry experts call an ownership clause. The person who owns the policy has the right to determine the beneficiaries of the policy. No one else can make that determination or change.

Another common clause you need to understand when comparing quotes is the incontestable clauses. These provisions protect the policyholder from the insurance company claiming the policyholder misrepresented something. The insurance company has a period after you get the policy to make sure everything you told them is accurate and that you held nothing back.

That is why many require you to go through health exams and give a complete medical history. Once they get through that period, they cannot make any claims to revoke the policy on information you did not disclose. These are usually 24 months long.

A common clause to understand when comparing quotes on term life insurance is the financial ones. A grace period clause gives you a certain number of days in which to make the payments on the policy once they become past due.

The policy remains fully in effect during that period and will pay a death benefit if the insured dies during the grace period. If the policyholder lets the policy lapse due to nonpayment, most policies have a reinstatement clause that allows the policyholder to pay up the past due premiums and get the policy back in place.

Exclusions are the big thing many people do not pay attention to when comparing quotes on term life insurance. A common one is the suicide clause that will not pay due to the insured's suicide within a two-year period. Another common one is the dangerous activity exclusion.

If you participate in high-risk activities such as base-jumping or rock climbing, you might not have coverage if you die during one of those activities. The war exclusion is very common. It does not provide a death benefit if the insured dies during combat. Read all exclusions very carefully before you sign on the bottom line. These can come back to haunt your beneficiaries in the future.

By: Mark Prip

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Term Life Insurance - The Cheapest Protection

Term life insurance is the cheapest most basic form of life assurance available. It does not include an element of investment. It's core feature is to only payout the sum assured if the death of the life assured occurs within the set period of time known as the term. If the policy is cancelled within the term then there is no cash value for the premiums already paid.

Decreasing term life insurance

The absolute cheapest version of term life insurance is decreasing or reducing term life insurance. Premiums for this type of insurance are lower due to the fact that the sum assured reduces to zero over the term period. This makes this type of term life insurance beneficial to protect a capital and interest repayment mortgage, since the mortgage balance reduces month by month. Should the life assured die at any point within the term then the sum assured will be sufficient enough to repay any mortgage debt and thus removing the burden on the remaining spouse and or family.

Advantages

* Decreasing term insurance is much cheaper than level term insurance.
* Can provide a cash lump sum to your dependents if you were to suffer loss of life. This cash lump sum can be sufficient to clear a mortgage or loan debt, providing the mortgage or loan is on a full repayment basis.
* Can be used as family protection to cover say your dependents education to age eighteen or twenty one. Since the cover decreases, you may not need the same level of cover for a 13 year as you would for a 3 year old.

Disadvantages

* If you are to survive beyond the term period then the policy has no maturity value. All premiums paid are lost. This is a protection only product no investment.
* The sum assured decreases from month to month, however the premiums will remain the same, level term insurance may be better value for money.
* The policy only pays out on death or terminal illness of the life assured. (Providing not taken with critical illness cover as well)

Level term life insurance

Level term life insurance offers a fixed sum assured throughout the term (the same amount for period of cover), the premium is obviously more expensive than decreasing / reducing term assurance, however the advantage is the benefit amount will remain constant. This type of policy is more suited to family protection (protecting your loved ones with a fixed cash amount on your death). But may also be suited to protect an interest-only mortgage or for business protection such as key man insurance, or shareholder protection.

Advantages

* The sum assured remains the same throughout the term of the policy. Therefore on death of the life assured the policy will payout the full sum assured meaning you can plan for the right amount of cover at any point in time during a specific term.
* A more appropriate life cover to protect the family and dependents. However this is only a one of lump sum payment.

Disadvantages

* If you are to survive beyond the term period then the policy has no maturity value. All premiums paid are lost. This is a protection only product no investment.
* Only provides a lump sum payment on death of the sum assured, if your family or dependents require a regular monthly income then family income protection may be more suitable.

By: Steve Wentworth

About the author

Steve Wentworth formed his firm Wentworth Financial Services in November 2007 having been in the industry since November 2002. Do you need a quote for cheap term life insurance we have life insurance starting at 16p per day.

Read the original article in context at term life insurance. http://www.wentworthfs.co.uk/articles/term-life-insurance-009.aspx

Term Life Insurance - What Is Term Life?

What is Term Life Insurance?

We actually get a lot of questions about term policies. The first questions that many people ask us are very simple. They ask what we mean when we say things like 20 year term or 30 year term. They really do not understand what this means.

Perm Vs. Term

It is probably easiest to understand if you compare it to other forms of life policies. Some policies are permanent. Examples of this would be whole or universal life. These policies will stay in force as long as they are paid for or paid up. They may also grow a cash value that can be borrowed against, cashed in, or even sold.

But a term policy is a temporary policy. Keep in mind, though, that the term can last for decades. So, for example, a 10 year term policy would be written to cover a person for exactly 10 years from the date of issue. After the policy ends, there is no cash value.

So in the simplest terms, you purchase a term policy to cover your life for a very specific period of time. This time time period is estimated to be the length of time you need the coverage. Some examples of this may be buying a policy to cover a home owner while a mortgage is getting paid off. Sometimes this is called mortgage protection insurance. If a home owner is responsible for paying off a twenty year mortgage, they may want to buy a twenty year policy in order to cover their lives and protect their family home.

Term Is Cheaper

Because it is a temporary policy, and because it does not grow a cash value, term premiums are usually much lower than whole or universal life premiums. And because it is cheaper, it may allow you to afford a larger death benefit. The lower price is one reason that many people are attracted to it.

I just want to make sure that people understand why term life is cheaper so they are spending their money for the right type of policy.

Is Term Life Better?

Every family has different needs, budgets, and financial goals. I cannot say which type of policy is better. If you need to purchase a larger face value policy now, but think your need for coverage will be lower later, then you may consider term.

There are some ways to make your policy more flexible too. You can add riders (options) to some coverage that may help you get more benefits. One rider is called Return of Premium (ROP). This costs a bit more, but it returns all of your premiums at the end of the contract. This turns your term policy into a sort of hybrid policy which actually does grow a cash value.

One other option to consider is the ability to convert your policy to a whole life policy later. That way, you can buy your cheaper term life now. But if your needs change in a few years, you have the option to exchange it for permanent protection without having to go through health underwriting again.

By: Marilyn Katz

Are You Thinking About Term Life?

Learn more: What Does Term Life Mean?

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