Term Life Insurance Senior Citizens – Term life insurance provides a death benefit that pays out to the beneficiaries of the policyholder over a fixed period of time.
Once the term expires, the policyholder can renew it for another term, possibly convert the policy to permanent coverage, or allow the term life insurance policy to lapse.
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When you purchase a term life insurance policy, the insurance company determines the premium based on the policy value (payment amount) based on factors such as your age, gender, and health. Other considerations that affect the rate include the company’s business expenses, how much it earns on its investments, and mortality rates for each age.
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In some cases, a medical examination may be necessary. The insurance company may also ask about your driving record, current medications, smoking status, occupation, hobbies, family history, and similar information.
If you die during the policy period, the insurer will pay the face value of the policy to your beneficiaries. This cash benefit—which is generally not taxable—can be used by beneficiaries to pay off your health care and funeral costs, consumer debt, mortgage debt, and other expenses. However, the beneficiaries are not required to use the insurance proceeds to pay off the deceased’s debts.
If the policy expires before your death or if you live beyond the policy term, there is no payout. You may be able to renew the term policy upon expiry, but the premiums will be recalculated based on your age at the time of renewal.
Term life is generally the least expensive life insurance available because it provides a death benefit for a limited period of time and does not have a cash value component like permanent insurance. For example, Insureon’s data shows that a healthy non-smoker age 30 can get a 30-year term life insurance policy with a $500,000 death benefit at an average of $30 per month until February 2023. At age 50, the premium will increase to $138 per month.
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Source: Quote. Quotes are for $500,000 30-year term life policies, men and women in excellent health.
In contrast, here’s a look at the rates for a $500,000 whole life policy (which is a type of permanent policy, meaning it lasts your lifetime and includes a cash value). As you can see, the same 30-year-old healthy male would pay an average of $282 a month. At 50, he will pay $571.
Source: Quote. Quotes are for $500,000 permanent life insurance policy, men and women in excellent health.
Most term life insurance policies expire without paying the death benefit. This reduces the overall risk to the insurer compared to a permanent life policy. Low risk is a factor that allows insurers to charge low premiums.
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Interest rates, insurance company finances, and state regulations can also affect premiums. In general, companies often offer better rates at “breakpoint” coverage levels of $100,000, $250,000, $500,000, and $1,000,000.
When you consider the amount of coverage you can get for your premium dollar, term life insurance tends to be the least expensive life insurance. Check out our recommendations for the best term life insurance policies when you’re ready to buy.
Thirty-year-old George wants to protect his family in the unlikely event of his early death. He purchases a 10-year, $500,000 term life insurance policy with a premium of $50 per month.
If George dies within the 10-year period, the policy will pay $500,000 to George’s beneficiary. If he dies after the expiry of the policy, his beneficiary will not get any benefit. If he survives and renews the policy after 10 years, the premiums will be higher than his initial policy because they will be based on the current age of 40 instead of 30.
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If George is diagnosed with a terminal illness during the first policy term, he will likely not be eligible for renewal when the policy expires. Some policies offer guaranteed reinsurance (without proof of insurability), but such features come at a high cost.
There are many types of term life insurance. The best option will depend on your individual circumstances. Generally, most companies offer terms ranging from 10 to 30 years, although some offer 35- and 40-year terms.
Level-premium insurance has a fixed monthly payment for the life of the policy. Most term life insurance has a level premium, and this is what we have been covering most of this article. As we mentioned earlier, this type of policy usually provides coverage for a period of 10 to 30 years. The death benefit is also fixed.
Since actuaries must account for the increased cost of insurance over the life of the policy, the level premium is relatively higher than that of annual renewable term life insurance.
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Annually renewable term (YRT) policies are one-year policies that can be renewed each year without providing proof of insurability.
Premiums increase year by year as the age of the insured increases. Hence, premiums can become prohibitively expensive as the insurance holder ages. But they can be a good option for someone who needs temporary insurance.
These policies have a death benefit that decreases every year according to a predetermined schedule. The policy holder pays a fixed, level premium for the term of the policy.
Decreasing term policies are often used in concert with mortgages, with the policy holder matching the insurance payments with the decreasing principal of the home loan.
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Term life insurance is attractive to young people with children. Parents can get adequate coverage at a lower cost, and if the insurer’s death policy is in effect, the family can rely on the death benefit to replace lost income.
These policies are also suitable for people with growing families. They can maintain the necessary coverage, for example, as their children reach adulthood and become independent.
The term life benefit can be equally useful for the older surviving spouse. However, premiums for people who wait until they are old enough to apply for insurance will pay higher premiums than if they had gotten a term-term policy when they were younger.
Each insurance company sets the maximum age for its term life insurance coverage. It usually occurs between about 80 to 90 years old.
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The main differences between a term life insurance policy and a permanent insurance policy (such as whole life or universal life insurance) are the term of the policy, the accumulation of cash value and the cost. The right choice for you will depend on your needs. Here are some things to consider.
People who own whole life insurance pay more in premiums for less coverage but have the security of knowing they are protected for life.
People who buy term life pay a premium for an extended term, but get nothing in return unless they have the misfortune to die before the expiry date. Also, term life insurance premiums increase with age.
Unless a term policy is guaranteed renewable, the company may refuse to renew coverage at the end of the policy period if the policyholder develops a critical illness. Permanent insurance provides coverage for life regardless of changes in the insured’s health until the premium is paid.
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Some customers prefer permanent life insurance because the policies usually include an investment or savings vehicle. A portion of each premium payment is allocated to the cash value, which usually increases over the life of the policy. Some plans pay dividends, which can be paid in cash or left in a deposit within the policy.
Over time, the cash value may increase enough to pay the premium on the policy. There are also many unique tax benefits, such as tax-deferred cash appreciation and tax-free access to the cash portion.
But financial advisers warn that the growth rate of policies with cash value is often lower than that of other financial instruments such as mutual funds and exchange-traded funds (ETFs). Also, substantial administrative fees are often deducted from the rate of return. This is the source of the phrase, “buy the term and invest the difference.” However, the performance of permanent insurance can be stable and it is tax-advantaged, providing additional benefits when the stock market is volatile.
Variable term life insurance is a term life policy that includes a conversion rider. The rider guarantees the right to convert an in-force term policy – or one about to expire – to a permanent plan without underwriting or proving insurability. The conversion rider should allow you to convert to any permanent policy offered by the insurance company without any restrictions.
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The primary features of the rider are maintaining the original health rating of the term policy upon conversion (even if you have later health problems or are uninsured) and deciding when and how much coverage to convert. The premium basis for the new permanent policy is your age at conversion.
Of course, since whole life insurance is more expensive than term life insurance, overall premiums will increase significantly. The benefit is guaranteed approval without a medical exam. Medical conditions that develop during the life span may not increase the premium. However, if you want to add more riders to the new policy, the company may require limited or full underwriting, e.g.
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