The Benefits of Term Life Insurance
A lot of people think they know a lot more about term life insurance than they do! I get it, it sounds simple, term life insurance goes for a term period and the death benefit is level and the premium is fixed. They just go to a term insurance quoting software online, put in their information, click submit and boom there is the cheapest quote. Even worse, they got signed up with their “good buddy” and have been paying double what they could have been paying, and then dig their heels in and insist on continuing to reward the company that has been overcharging them with even more premium dollars! What they are missing is the fact that insurance companies do not underwrite policies the same way. All term life insurance is not created equal. Some companies are better for people who smoke e-cigarettes, cigars, or chew tobacco and still have nicotine in their system when they complete the medical exam, while some companies do not require a medical exam at all. There are insurance companies who will issue a standard non-tobacco plus rating for people who smoke marijuana less than three times per week and still have it in their system, while other life insurance companies will offer a super preferred non tobacco if the insured smokes marijuana less than two time per month and does not have it in their system when they complete the paramedical exam. Other companies are better for people who are diabetic with elevated A1C levels, or high blood pressure, cholesterol, or someone who has had a DUI. Other term life insurance companies are better for private pilots, depending on how many hours they fly per year and the total number of flying hours the insured has under their belt they could qualify for the best / excellent rate class possible depending on how the applicant completes the aviation questionnaire.
The point is term life insurance is not as simple as most people think. There are term life policies that have living accelerated benefits such as terminal, chronic, and critical illnesses at no additional charge built into the policy. Terminal illness typically means that the insured is diagnosed with an illness that will result in death of the insured within the next 24 months. Once you qualify the insurance company cuts a check before the insured dies to the policy owner so they can use the accelerated death benefit proceeds however they choose to. If you had 6 months to live what kind of difference would access to $500,000 make for your treatment and family? Chronic illness means the insured qualifies as chronically ill if a licensed health care practitioner certifies that the insured is unable to perform, for 90 consecutive days, with substantial assistance from another person, at least two Activities of Daily Living or suffers from severe cognitive impairment. (Activities of Daily Living include bathing, continence, dressing, eating, toileting and transferring.) If you have had a mom, dad, or grandparent in a long term care setting you know the financial strain this puts on the family. The chronic illness benefit could pick up the slack by accelerating money from your policy to cover these costs. Critical illness typically means the insured qualifies if a physician has certified the insured has had one of the following specified medical conditions within the last 12 months: cancer, heart attack, kidney failure, major organ transplant, stroke, end stage renal failure, blindness, paralysis, arterial aneurysms, central nervous system tumors, major multi system trauma, AIDS, severe disease of any organ, severe central nervous system disease, major burns, loss of limbs. The price might be $2 more per month than a typical death insurance policy, or it could be significantly less than you are already paying, but the consumer who does not know the difference goes with the lowest price term policy or sticks with their captive agent because they are “happy with what they have” loses out on significant living benefits for terminal, chronic, and critical illnesses.
Converting Your Term Life Policy
The other huge factor is conversion privileges in the life insurance policy. Yes! I get it!!! You are not going to ever buy permanent life insurance. But, several times clients will have a health situation come up during the term life insurance period which makes them uninsurable to purchase another term life insurance policy, because their health has changed. Most of the time we will convert the term life policy to a low cost guaranteed universal life insurance policy where the owner pays the lowest guaranteed premium with a guaranteed death benefit until age 120. These policies if converted within the restrictions in the term policy, have the accelerated benefits in the policy when the term policy changes to a permanent insurance policy.
The point is, not all term life insurance is the same, and not all insurance agents know the difference.