There seems to be a bit of confusion on just how do term life insurance policies work? So when it comes to Life Insurance, Term Life Insurance is the easiest type of policy to understand. I’ll detail the important aspects of what you need to know on how term life works to better prepare you for your next life insurance buying experience.
What to know about Term Life Insurance:
- Level Term Period: You select the length of time that you want your premiums and death benefit guaranteed for. Depending on the carrier you choose this could be 5 years, 10 years, 15 years, 20 years, 25 years and last 30 years.
- Face Amount or Death Benefit: Select how much death benefit you want on your contract. There are a number of different ways to end up with this number, your broker/agent or planner can perform a needs analysis projection. A quick and easy way to come up with this number is a multiple of income calculation. For example multiply your income by ten, fifteen or if you are young enough you could go up to a multiple of twenty. This can give you a rough estimate of how much the life insurance carrier will allow you to apply for based on their financial underwriting guidelines.
- Select your Carrier: If your broker or agent has done there job correctly you should be looking at a spreadsheet of multiple carriers rates and premium amounts. Have a good discussion with your broker on the companies, ratings, underwriting and convertible permanent products.
After this discussion you should be ready to apply for the policy take your exam and then wait for your formal offer from the carrier. If you receive an offer that you are not happy with ask your broker if it is wise to shop your case to other carriers to try and get a better rate. This is very common in the wholesale life insurance brokerage world and the larger the case the more leverage you have.
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