Different Types of Life Insurance

Life insurance can be defined in two categories: Term life and Whole life insurance. If you want to buy a policy for a specific term, then it will cover you for a pre-specified period of between five and thirty years, or sometimes more.

Permanent or whole coverage on the other hand, lasts for a lifetime, provided payments are met. There are several sub-categories which will be reviewed shortly.

Basics about Level Term Plans

Term life insurance is by far the more popular of the two categories as premiums are generally cheaper and you have more flexibility as a customer. Premiums are level for the entire duration and as a basic insurance product they don’t accrue cash value over time. These plans do not offer an investment option to the beneficiaries the manner in which whole life insurance products do.

You can get wider coverage and save a lot of money at the same time. Insurance companies have been able to keep the right balance. Term life insurance is cheap because, unlike in the past, people can come to a site like Beyond Quotes and look at dozens of plans and compare prices in about 2 minutes.

In fact, many people who have never priced a policy are very surprised to find that a very great amount of coverage for small monthly premium.

For example, $20 a month can purchase a policy with a face amount of several hundred thousand dollars even for someone is their 40's if they are determined to be in excellent health.

All the applicants must follow the guidelines while applying for it.

In order to do so, most people who buy term life coverage agree to undergo a medical exam for the purpose of finding the rating class which in turn will determine the amount of money they are required to pay for a given policy.

This exam will typically include a blood and urine test, blood pressure reading, cholesterol reading, recording of weight, and a questionnaire about one's health history.

If a large sum is being applied for, an EKG and a chest x-ray may also be required.

No Exam Life Insurance

For those who do not have the time or inclination to submit to a medical exam, there is also something called No Exam Life Insurance.

The only difference is that instead of having to submit to a medical exam, all that is required is a written health questionnaire.

It is different from a regular term policy in these respects:

  • It usually has a ceiling of only $250,000
  • It can sometimes cost more than a regular term policy (but not always)
  • There is no medical exam required, as the name suggests
  • It can be issued in days or even hours whereas a regular term policy requiring an exam can take weeks or months

Virtually every kind of insurance has many different rating classes, and each company goes about underwriting (which is the art of determining what rating class a particular applicant falls in, among other things) a An important point to remember is that only half of enrollees will be awarded the rating class of Standard Life Insurance.

You may find no exam tem life insurance a little expensive at first. You need to start reading all the aspects of buying a policy and comparing the benefits to find the right plan. We provide expert guidance on the subject of finding the best plan by providing customized services to every single customer.

An important point to remember is that only half of enrollees will be awarded the rating class of Standard Life Insurance. No-exam life insurance may not be substantially more expensive than regular life insurance and the bonus is that you are more likely to qualify. An experienced agent such as ours will be able to guide applicants towards their optimum insurance policy and help you determine what will work best for you.

Return of Premium Policies (ROP)

Anyone who has shopped for life insurance would be familiar with the term 'return of premium' (ROP).

The way this works is simple. You pay more for a term insurance policy. The beneficiary would receive the amount, the total figure spent on premiums during the tenure, at the successful completion of plan.

Sounds great, right? Well, from the perspective of someone versed in financial planning, it probably isn't.

Insurance companies are able to offer this because they will be able to earn interest from the additional premium that will come to a greater amount the premiums you have paid in over the years.

Oddly enough, the longer the length is with ROP, the less it costs. That's right, all things being equal, a ten year term ROP policy will cost more than a 30 year ROP term policy with the same face amount.

Therefore, more capital is needed to cover the cost of the premiums.

Getting an ROP plan is not necessarily the worst thing you can do with your money if you do not have the opportunity or self-discipline to invest the money you hopefully would have saved by getting a regular term policy.

Everyone else should think very carefully before getting ROP term life coverage. Keep in mind, however, that agents are going to sing the praises because it makes them about twice the money as a regular term policy.

But if you run the numbers it doesn't make a lot of mathematical sense even if it might initially seem appealing.

The Importance of 'Guaranteed Renewability'

If there is one rider worth having for any term policy, no matter what kind it is, it is something called guaranteed renewability.

If you buy a 30 year term life insurance at the age of 45, by the time you are 75 you may have a real need for it which is more often used for the purpose of estate planning.

As you age, the chances that you will be able to qualify for insurance decrease dramatically, so this is a very important thing to have.

Annual Renewable Term

This kind of policy is guaranteed renewable every year, but, unlike a level term policy, the amount of premium required each year to keep the policy in force will increase as the insured ages.

Permanent life coverage is the other broad category of insurance.

It is different in the following respects:

  • It builds what is called "cash value"
  • It is much, much more expensive than its term life counterpart
  • It does not expire in the same manner

It is useful for those who have a permanent need for it. Most frequently, these two needs are:

  • Estate planning
  • Providing ongoing financial support for a special needs individual

A permanent policy of one kind or another is often superior to a term life policy for both of these needs.

One does not consider estate planning needs, obviously, until one actually has an estate.

For most people this is after age 50, and rarely before the age of 30. Since term insurance expires eventually it is not suitable for this purpose just as it isn't for providing financial resources for a special needs child for the exact same reason.