Why Guaranteed Term Life Insurance is a Better Choice
Posted by Lenny Robbins on Tue, Jan 24, 2012 @ 03:42 AM
With a guaranteed term life insurance policy, your premiums and death benefit are guaranteed to stay level throughout the entire term, as long as you pay the premiums. For consumers whose primary aim is to provide security for their loved ones, this option is often the smartest buy.
Why Guaranteed Term Makes Sense
A guaranteed term life insurance policy has FAR LOWER premiums than permanent policies such as whole life or universal life. Permanent policies may build a cash balance that can be borrowed from, or cashed out by terminating the policy—but you don’t get the cash if a death benefit is paid out! If your goal is simply taking care of your family if you die, the extra premium cost may not be justified.
Compared to the other two types of term life insurance—annual renewable and decreasing term—a guaranteed term life insurance policy also is usually the best choice.
With annual renewable term policies, your premium goes up every year along with your age. You start out with a low rate, but as you age, your insurance cost increases. When you really need the policy, chances are you’ll be paying a higher rate than if you began with a guaranteed term policy.
And you won’t even necessarily get a cheaper rate to start. Working with a veteran independent life insurance agent, you can find short-term guaranteed policies that are actually cheaper than annual renewable policies.
With decreasing term policies, also known as mortgage insurance, your premium stays the same throughout the term, but the death benefit decreases. If providing security to those you leave behind is your purpose for life insurance, this decreased death benefit is obviously a problem.
Flexibility Matters
One of the advantages of guaranteed term life insurance policies is that they usually can be easily and inexpensively adapted to meet future needs:
- Most guaranteed term policies offer conversion options that allow you to switch to a permanent policy for a specified period at the same health rating you had for the original term policy at your current age.
- If you need coverage for only a short period, you can buy a guaranteed term policy and cancel it when it’s no longer needed, with no complications.
- With one carrier you don’t have to buy guaranteed term life insurance in five-year multiples. If you only need 18 years of coverage—not 20—you can find a guaranteed policy for 18 years. Your independent life insurance agent will know which carrier.
The Bottom Line
An experienced independent agent can help you determine if guaranteed term life insurance is indeed your best choice. And if you do decide on a guaranteed term policy, the agent will search among multiple carriers to find the lowest price for you. The agent will also know which carriers offer the best conversion options.
An independent agent will make you aware of knowledge you can use to your advantage, such as the fact that 10-year level term policies are often cheaper than five-year policies because the competition is much fiercer for 10-year policies.
Don’t be fooled by the relative simplicity of guaranteed term life insurance. There are numerous factors than can make the difference between a great deal and an OK deal.
Protect yourself from making the wrong purchasing decision by working with a quality independent agent.
Photo Credit: Christopher