Simplifed or Traditional Term Life Insurance Policy? Here's Your Answer

Of late, Simplified Term Life policy has gotten much hype. No doubt that internet has played the pipe for it. Google takes you here, google takes you there. You must have come across the phrase in between and wondered about it. You are likely to have gone through the idea even. That’s delicious. Or, is that?

Let’s check. 

Chaffing the Grain

What is in the name? A rose a rose. But it is not always true ---the attitude. 

But when it comes to paying from your pocket for insurance, name matters most. Name is priceless, invaluable. It is the character here.  It matters for beneficiary. It matters for the policy that you buy. Name is the thing- the product. 

   You should read-Term Life Policy- 5 Companies Compared

What Is It?

Nothing else than a Term Life Insurance Policy. The content is the same. The process is what makes it simple. Hence they name it Simplified Term Life Insurance. As such, you are covered for over a period of 10 to 20 years which is extendable, from mostly 80 years to 121 years of age. This varies from company to company. Your coverage typically starts from $$10,000 to $$100,000 or even more. It may also be convertible to permanent. 

The Mind Game Behind

It is good that insurance giants are coming up with newer policies for your benefit. Simplified Insurance Term Policy is, as I already have alluded to, such one. This has made Term Life Insurance Policy 'literally'literally hassle-free. Many a man does not want to go through medical check-ups, produce tons of documents or sign on them for their term life policy as there is no cash-value like in the perm insurance. This policy is for them. Insurers have designed this policy specially for you.  

It can be very well likened to filling forms for online surveys. Yes, it is that easy!  You simply answer to a couple of questions regarding your health conditions, driving records etc you are done.

 

Easier Sounded than Meant

Although you are likely to see ads telling you you are clicks away from your awaited insurance policy, it may not be that easy to sign up. You may not qualify for the policy if you are not found eligible. The first thing that may make you ineligible is your age. For example, NYL considers applicants between the age-range 30 and 74. Similarly, if you have had fatal health issues like HIV, AIDs,  mental impairment history that has affected you work-capability, or kidney diseases you are not to be enrolled on this policy. 

What If You Tell a Lie

You might think the information that you provide them is what they base on. Wrong. They will get your information checked on their own. It will range from medication history, driving to multiple simultaneous insurance policy-holding. You are mostly likely to get caught if you lie. You may be sued for fraud by the state in such case.  

The Premium Issue

Despite ads that you have affordable insurance policy for simplified term life, the fact remains that you are going to have larger premiums for it than that of a traditional Term Life Policy. As the insurer does not have direct knowledge of you (despite checks) beyond what you provide them, your naturally pay for the risk they take for you.

So Finally,........Traditional or Simplified?

When everything in life situation is complicated, you may have found the simplified term policy worth it. But don't just rush for it. Simple is not always simple. You need to give it thoughts before you proceed.

 Yes, why would you pay more for decades for a few hours’ of hassle? And aren’t they screening you behind the scene? Why would you take the risk of being sued for fraud, aware or unaware? Besides, you have less add-ons here than those on your traditional life insurance policy. 

Better? Yes, the traditional is always better. It is good to go through some hassle--- to talk things through.  You have your answers. You know what you are doing. You have your choices to make. So take a turtle-step instead of haring into your policy off-hand. It is wise not to be led to accepting the simplified prima facie. After all, it is an insurance policy.

Image Courtesy: centraloreqoninsurance.com

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Term Life Insurance - Worth a Thought: Loan Insurance US

Term Life Insurance: Don't Rush to Buy

Also Readable: Whole Life Insurance- How It Works

When did you fall sick last, requiring you to see a doctor and have a few tests? Before you could heave a sigh of relief and say gratefully, “Thank God, I am safe! ” you must have noticed you have gone through a world of worries. Those worries had both centers and sub-centers, each dominating reciprocally the other. 

You were primarily worried about your health and then at the sub-center there were your 27 years old sweet homemaker wife Jane and 7 years old daughter Susie. Your worries made years of hours. Your worries lost themselves out to each other, each looming larger than the other. You kept yourself asking: What will happen to Susie and Jane after me? You kept yourself questioning: What have I done all these years?  

Life is like that. Maybe, you could not manage a savings check till today. And you worry what if anything befalls soon! You cannot get a million dollars in a year or two, can you? Then you remember Jacob, your friend in the insurance company. You just shrugged off his advice for a term life policy months ago. Maybe it is time you call him back. 

Don’t just hare it!

It is not that your Jacob is the last hope for you. So talk tea to him. Don’t rush to say, “Hey Jacob, sorry I refused you. Get me a life insurance policy opened.” By saying so you make four mistakes.

One) You forget you leave it for Jacob to decide for Susie and Jane.

Two) You remain in the darkness as regards what you do or Susie or Jane benefits.

Three) You again do not give a fig care to your hard-earned money.

Four) You are not aware that Jacob will have a pocketful for your policy.

So what should you do? – Deal with Jacob the insurer, not Jacob the friend. (No doubt friends are the best gems of life, though. Surely, Jacob will not do you any harm. But you should know what you do. ) Ask for his guidance both as a friend and insurer. Better, you have some knowledge before you buy what Jacob sells. If you are for a term life (if your life situation is like above, it is for you), you should have some basic knowledge about it. 

Here are the answers to the questions you should know about term lifeinsurance:

What is a term insurance policy?

You fear that your spouse, son or daughter’s future will be vulnerable in case of your leaving them at your current situation. You calculate that they could be safe if a certain period of time is gone. (For example, your son will have completed his education in 15 years.) That is to say you fear of a vulnerable period for your cared ones. You estimate that they could survive without you if they could get a certain amount of money should anything occur to you within that time. Now you look for an insurance policy that suits you.  The policy you need is a term policy. Usually term life insurance covers from one single year to 30 years in the most. Some companies are also offering customized term coverage.

What are its types?

Term life insurance has two types: level and renewable. With the level, your premiums remain unchanged during the whole term. If it is $60 a month, it will remain so till the end of the term. But with renewable it changes every year. The change is, of course, toward the increase point.

What do they mean when they say they offer guaranteed benefits for their term policy? 
You should not be carried away by advertisements. The benefits are to be validated. Guarantees work only when they get validated as par the contract made between you and your insurer. 

What is a rider? 
A rider is an add-on or extension to a policy. It may be metaphorically said that it is like getting an extra tyre to your newly bought Sedan. However, there is a difference. When Sedan offers it for free, your policy does not do so. It sells it to you as a product. So a rider is an add-on to an original insurance plan. Insurers offer different riders for their customers to choose from according to their requirement.

It is optional for you to accept a rider or refuse it.

What are the usual riders?

Riders vary with products and companies. However, the following ones are the commonest:

a) Death Benefit Rider

b) Accident Benefit Rider

c) Permanent Disability Rider

d) Terminal Illness Rider

e) Renewal Provision Rider

f) Spousal Insurance Rider

g) Child  Rider

h) Premium Waiver Rider

i) Income Benefit Rider

What does term insurance cover? 
Despite the generally popular notion that term insurance covers only death, insurance companies are offering:

a) Mortgage coverage

b) Education coverage

c) Supplemental income coverage

How much do my beneficiaries get if I die within the term?

Insurance company ads claim that they give the beneficiaries the full amount you insured them for. This is only the part truth. The fact is that to get them the full amount you have to pay premiums up to a certain time regularly and in time. Also your death must meet the conditions referred to in your policy. Certain causes are accepted and certain causes are not. For example, in case of your committing suicide, the beneficiaries will get nothing.

Why is it said that term life has no cash value?

Your insurance company does not owe anything to you if you die beyond the term or fail to meet the criteria or terms and conditions of the policy. Once your term is over with you living, you or nominee get nothing. This is why term life is a no cash value policy.

What are the pros and cons of term life insurance?

Check out the list:

Pros:

a) Safeguards your dear ones. 

b) As low as $15 premiums. (However, this depends on several factors like your age, insurance coverage, tobacco habit, health conditions etc.)

c) Customized plans.

d) Affordable even in tightest budgets.

e) Switchable to permanent or whole life insurance (not always, though)

Cons:

a) No cash value

b) Certain health conditions prevent you from getting the policy.

c) Specific term can only be converted to permanent life insurance upon certain conditions.

How should I know if I need term life insurance or not?

 You should consider term life insurance if:

a) You have been a poor saver.

b) Your son/daughter/wife will be in financial trouble in your absence (If you have a family.)

What is your advice for term life insurance?

Insurance agents are smart people. They come to you well-equipped. So it is easy for you to get easily motivated to rush for the policy they suggest. I would suggest the following tips for you:

a) Make sure you shop enough around and have the highest coverage for the lowest premiums

b) Make sure you can convert your policy from term to perm

c) Make sure your policy has add-ons.

d) Make sure they have the right add-on for you

e) Make sure you have read between the lines of the terms and conditions

f) Make sure that the company you insure with is well-established

g) Make sure you have read and understood all the terms the company uses in the policy papers.

h) Different companies sell the same product in different names. They differ only on certain points. It is always good to understand them. 


Image Credit Goes To:cheapertermlifeinsurance.com

Recommended Reading: Whole Life Insurance- Types, Pros and Cons

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Do You Have The Knowledge To Buy The Right Life Insurance?

We'll start with the all-time dilemma; the question of whether you should purchase a Term Life Insurance or another type of Life Insurance that accumulates cash value. One way or another, everybody is aware of the main reason why this question constantly surfaces; monthly premiums! Term Insurance happens to be the least expensive, and most of the time people tend to purchase it just because of this reason.

Additionally, people get different answers from different insurance professionals; some advocate Buy-Term and Invest-The-Difference and some recommend Whole Life, Universal Life, Variable Life, or maybe combination of the two or more of them. In the end, choosing an insurance policy becomes a dilemma between the premiums and the suggestions that you hear from various insurance professionals.

So what is the answer to this question and how do you select the right insurance policy for yourself?

In reality, there is no cookie-cutter answer for purchasing either Term, Whole Life, or any other one for that matter. Everybody has different needs and one size hardly fits all. So in order to accommodate different situations and needs, Life Insurance has evolved into many different types. As a result, the right choice depends on your answers to the following questions:

o What is the very purpose of your life insurance?
o Why are you really buying it?

You should keep in mind that Life Insurance is indeed one of the most versatile products that you can purchase in the market. It can be used for many purposes such as;

o Retirement Supplement
o Pay off debt
o Estate Planning
o Pay off taxes
o Supplement for a college education
o Income replacement for your spouse
o And the list continues depending on your personal needs

Once you determine the purpose of your needs, you now have to identify the type of life insurance you should be purchasing. This actually creates another dilemma; now you need to have the proper knowledge of every type of policy so you can decide which one or maybe the combination of the ones to purchase. On this note, let's touch base with the main types of Life Insurance Policies in the market:

o Term Life
o Whole Life
o Universal Life
o Variable Life

It should be pointed out that these are only the main types of life insurance policies where there are also many others as well as the variations of these policies available in the market. Nevertheless, in order to decide which one of these policies is more suitable for your personal needs requires broad knowledge and here are just a few important topics that you need to be aware of; how these policies develop cash value, how dividends get distributed, the time period you have to pay into your policy, how premiums are calculated, any premium changes after a certain time period, is it participating or non-participating, etc.

Of course as a third step, you also have to calculate the amount of life insurance you need as well. This indeed is separate topic and the methods of calculations can be put in a nut shell as follows:

o Multiples of Income Approach
o Financial Needs Analysis Method
o Capital Needs Analysis Approach
o Some other methods that various insurance companies developed themselves

In summary, following is the list of the key steps of purchasing the right life insurance for your personal needs;

o Deciding why you are buying the policy. In other words, what's the purpose of your life policy?
o Knowing the type of policy that suits the best for your personal situation. Is it Term, Whole Life, Variable Life, Universal Life, or combination of any of these policies?
o Calculating the amount of your policy based on your purpose

One way or another, getting a life insurance is not just buying the least expensive policy, it is indeed a series of decisions and calculations that requires considerable amount of knowledge. The process can be quite tedious, depending on your situation, and it is best to consult an insurance professional to have it done right.