Which type of life insurance policy allows a policy owner to pay more or less than the plan premium?

Protecting your loved ones financially in the event of your death is simple when you get a term life insurance policy through IntelliQuote®. Term life insurance policies offer a cost-effective way to leave a cash sum to your family if you pass away while the policy is active. Many people choose term life insurance plans to provide coverage for specific expenses that they know will exist over a set amount of time (most commonly 10, 15, 20 or 30 years) such as mortgage payments, education costs, and funeral expenses. Term Life insurance is the most affordable form of life insurance coverage available.

What is term life insurance?

Term life is a type of life insurance policy that guarantees the premium or payment amount for a fixed duration or term. The policy will continue to be in force after the guaranteed level premium term, if premiums continue to be paid; but this is usually at a higher premium than during the guaranteed level premium.Term life insurance is an economical choice for families and individuals to provide coverage for financial exposures over a specific number of years. Term policies allow you the flexibility to only pay for the coverage you need for the length of time you need it.

How does Term Insurance Work?

Term Life Insurance is actually very simple–you pay a set premium in return for a fixed amount of life insurance coverage. If you pass away during the policy term your insurer will pay the coverage amount to the beneficiary named on your plan; as long as premium payments are current.

Here is an example:

Daisy Smith pays a $25 monthly premium for a policy with a 30-year term and, as a result, secures a $500,000 policy. Daisy passes away 5 years after taking out the policy. The insurer pays the beneficiary of the policy $500,000.

One of the most common questions asked about these policies is: "How much is the premium for life insurance?" The simple answer is that insurance premiums vary depending on your health and age. Term life insurance premiums are the most affordable of all life insurance policies available. This means policyholders are able to maximize their coverage benefit. Put simply you’ll be able to afford a higher level of coverage for your budget. The affordability and simplicity of term life insurance make this type of policy the most popular choice among families.

Term life insurance can provide for more than just end of life expenses

Term life insurance policies are often seen as a way to provide coverage for funeral expenses, they actually provide for many other financial needs. Think about the expenses you and your family will have over the next 10 years, this could be mortgage payments, college fees, day-care costs, and other day-to-day living expenses. A term life insurance policy can provide the finances needed to cover these costs and more,should you pass away unexpectedly.

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Some of the common uses of a term life insurance payout:

• Protect your family's standard of living with income replacement
• Pay off debts such as a mortgage, credit cards, etc.
• Pay for children's college education
• Key person or buy/sell agreements for a business
• Divorce settlement
• Pay for final expenses including medical costs

Who can buy Term Life Insurance?

There are only a few restrictions that prevent people from buying Term Life insurance. If you haven’t been diagnosed with any life threatening health conditions and are 80 or younger you should be able to purchase a Term Life insurance policy. To find out if you’re eligible for coverage you can use our online quote tool to request quotes from many of the best highest-rated life insurance companies in the US.

Boosting Your Coverage With Additional Benefits and Riders

A rider is an additional benefit that can be added to a policy. Rider provisions allow for additional benefits and meet the unique needs of policyholders. It is important to understand the terms of each rider, as each insurer has different definitions that may impact your qualifications. Keep in mind , buying a rider may require paying an extra premium. A few of the more common riders available are:

Waiver of Premium

In the event that the insured becomes disabled, this rider will pay the premiums on your life insurance policy for the duration of the disability up to the policy expiration date. The definition of “totally disabled” may vary from one insurer to another, making it important to be aware of the terms and conditions of this rider.

Accelerated Death Benefit

This rider is included in most policies at no additional cost. It provides that a portion of the death benefit becomes available to help with expenses, should the insured be diagnosed with a terminal disease and their life expectancy becomes 12 months or less. Also, the definition of “terminal illness” may vary depending on the insurer, so make sure you are familiar with the terms and conditions.

Child Protection Rider

No one wants to think about the death of a child. However, in addition to relieving the financial burden to the family, this rider provides a guaranteed conversion option to a permanent policy. This essentially guarantees parents the ability to purchase lifetime coverage for that child without requiring a medical exam.

Conversion Option

When you purchase term insurance it is for a period of time between 10 and 35 years. With this rider, some life insurance policies will allow the policy to be converted into a permanent life insurance product without a medical exam. This can be beneficial especially to someone whose health has deteriorated over the years and may not be able to secure new coverage at the end of the guarantee level premium period of their original term policy.

Return of Premium

One of the disadvantages of term life insurance is that if you outlive the term of the policy then you do not receive any type of payment. This rider provides a guarantee that if you outlive your coverage your premium costs will be reimbursed. This effectively makes coverage free. If you were to pass away during the policy term your family will still receive the coverage amount.

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Types of Term Life insurance

When picking a Term Life insurance plan you’ll need to decide on which type of policy best fits your needs. There are many different types of Term Life plans available that can help you protect your loved ones from financial stress; you’ll be able to choose from the following options:

• Guaranteed Level Premium Term Life Insurance
  Level Term Life plans offer fixed Term Life insurance premiums for the entire duration of the policy guaranteed level premium period. This is one of the most common types of Term Life insurance plans and they often offer the option to renew once the policy expires.
• Annual Renewable Term Life Insurance
  These policies can be renewed annually until you attain a maximum age which may differ by state. The policy premium will increase each year.
• Convertible Term Life Insurance
  Convertible policies have the additional benefit of offering the option to convert the Term Life plan into a permanent life insurance contract. Instead of a fixed length plan the coverage will last for life. If you convert the plan during the specified time you avoid having to undergo an additional medical examination; regardless of your current health condition.
• Return of Premium (ROP) Term Life Insurance
  Return of Premium policies guarantee to repay the policyholder the cost of the premiums if they outlive the policy guaranteed level premium term. These policies have the advantage of returning the policy payments to the insured but they are also more expensive than some of the other types of Term Life plans.
• Decreasing Term Life Insurance
  The unique feature about these policies; as the policy ages the death benefit decreases. This means that the policy will pay out a smaller amount each year older the policy gets. These are designed to provide coverage for debts that decrease at a predictable rate, such as mortgages.

Calculating your coverage needs

To get the most out of a Term Life Insurance policy it’s important to calculate how much coverage you’ll need to help keep your family financially secure if the unexpected should happen. Make a list of all of the expenses you’d like to cover to make life easier for your loved ones, and include day-to-day costs in addition to upcoming expenses such as college tuition fees. You can also use our online term life insurance calculator to help you work through the process and to help determine which option is best for you.
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Buying insurance can be complicated and confusing. Understanding the various types of insurance available is an important step to providing life security. Request a quote today using IntelliQuote’s easy online quoting form to find a term life insurance plan that protects your family when they need it most.

Affordable plans to protect your family

Term Life plans are the most affordable way to get life insurance coverage. Term Life policies are able to provide a high level of coverage for low premium rates, as the risk of issuing a policy that only lasts for a set number of years is much lower than the risk of policies that offer life time coverage. There are many factors that will help insurers calculate the risk of issuing you a policy and in turn determine the cost of your Term Life insurance premium:

• Your age
  Your age is one of the main factors that contributes to the cost of your life insurance premium. The younger you are when you apply for your policy the lower the premium will be. This is because the insurer is less likely to have to pay out on a Term Life plan when the policyholder is younger.
  


• Your past and present health
  When you apply for a term life insurance policy you’ll be required to disclose your full medical history and you may also need to undergo a medical exam. Life insurers need to establish a clear picture of your current and past health in order to calculate your Term Life insurance premiums. The medical exam generally includes measurements of your height, weight, and blood pressure. You will also need to provide a urine and blood sample, which are used to check for diabetes, high cholesterol, and problems with major organs. Some medical exams also include an EKG to evaluate your heart function. The tests are very simple and usually take less than 30 minutes to complete. The results of these tests are used to calculate your premium. Maintaining a healthy body weight and active lifestyle can help keep your premiums low. There are policies available that do not require medical exams but policy premiums are generally higher.
  


• Your family medical history
  Your family medical history also plays a role in determining your life insurance premiums. The insurer will be on the lookout for any family medical conditions that have a genetic link and could be inherited by the policyholder. In particular they pay particular attention to illnesses that can cause premature death such as cancer and heart disease.
  


• Tobacco use
  Tobacco users generally fall into their own rating category (the health levels used to determine pricing) for premiums and the policy cost will be higher. If you’re only a light smoker, such as someone who smokes cigars only a few times per year, it’s important to compare policies from many insurers as each will have their own rating on what they consider a tobacco user for insurance purposes. Your policy quote will be lower if you’re considered a non-smoker.
  


• Your lifestyle
  There are two key areas of your lifestyle that could impact your life insurance premiums, these are: your profession and your hobbies. Your profession is important to the insurer if it’s considered high risk, you may see an increase to your premium . Hobbies are also an important factor in calculating your premium amount, the insurer will want to know if you have any dangerous hobbies that could lead to an early death or severe disability. If you frequently participate in activities deemed dangerous by insurers such as scuba diving, skydiving, motor racing, bungee jumping, paragliding etc. you may struggle to find life insurance or face high premiums.
  


• Your driving history
  This is often the most surprising factor for many people. Why would a life insurer be interested in your driving history? It’s actually pretty simple, it’s just another factor in assessing the risk of issuing you a policy. They use your driving record to look for any history of risky driving behaviour such as driving under the influence and speeding convictions. Those with a clean license will generally receive lower quotes than people with a history of driving offenses.
  

Paying for your policy

Once you receive a premium quote you’ll have four ways to pay for your policy: annually, semi-annually, quarterly, and monthly. Insurers provide these options to make it easier for policyholders to make payments and fit life insurance into their budgets. One thing to be aware of is that you might receive a discount for paying your premium in advance; this means that annual payment plans are often the cheapest option. Calculate how each of these options fit into your overall budget to decide which option is best for you and your family.

Frequently Asked Questions

We understand that life insurance can be confusing so we’ve put together a list of some of the most commonly asked questions we get about Term Life insurance:

How do I know which insurers are reputable?
Life insurance companies are rated based on their financial stability. As Term Life insurance policies can last for many years you should choose an insurer who receives a high rating as this is a strong indicator of their long-term financial viability. There are a number of independent rating services that give unbiased ratings to all reputable insurers in the industry. Some of the most well known are Moody’s, Fitch, Standard & Poor’s, and A.M. Best. Standard. Ratings range from A+ to C, with A+ being the best.

What are life insurance ratings classes?
Life insurance companies use classes to calculate your life insurance premium. These classes and the parameters that determine who fits into each class vary by insurer. There are commonly up to four classes, which are: preferred plus, preferred, standard plus, and standard. Preferred plus is the best possible rating and people in this group pay the lowest premiums.

Can I get life insurance if I’m a smoker?
Absolutely. Many insurers offer policies to tobacco users. If you regularly smoke you’ll be assessed using the insurer’s ratings classes for tobacco users. This means that your health will be rated with the understanding that you are a smoker and premiums will be calculated at a higher rate. If you’re only an occasional smoker some insurers may assess your health using the non-smoker ratings, which means you’ll receive a lower quote. You should compare plans from multiple insurers to find the best policy price.

Do all Term Life Insurance policies require a medical?
No, not all Life Insurance plans will require you to undergo a medical exam. However, you shouldn’t rule out a policy because it requires a medical. Medical exams are actually very simple procedures that last between 15 and 30 minutes. Policies without medical exams are often more expensive, so should not be the first choice for most people.

Should I stay with the same insurer that my parents/other family members use?
Not necessarily. As life insurance premiums are based on many factors you may find that a policy offered by the insurer your family or friends recommend may cost you more than a premium from another reputable insurer. To find the best plan for your needs it’s important to compare quotes from multiple insurers.

How do I apply for a plan?
Applying for a life insurance policy is easy with IntelliQuote. To start the process you can request quotes using our online quoting tool. You’ll then select from one of these quotes and begin the application online. One of our licensed life insurance agents will then contact you to guide you through the rest of the process.

When will the insurance policy coverage begin?
Your policy coverage will begin once the application forms are submitted, the medical examination is completed, all paperwork signed, and the premium paid. Many insurers will offer temporary coverage once the medical examination is finished and the first payment received.

What happens when my Term Life policy ends?
This depends on whether your policy is renewable. If the policy isn’t renewable you’ll need to apply for a new life insurance policy. If your policy is renewable it will offer what is known as a guaranteed maximum renewal premium, this is the maximum amount you’ll pay to renew your premium. You can choose to renew your existing policy or shop around for alternate coverage.

What is the premium in life insurance?
The premium is the amount you’ll pay for your life insurance coverage. The premium is calculated using a number of factors including your age, your health, your family medical history, the policy amount, and the policy length.

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