Life insurance is a valuable asset and provides a way to protect your loved ones in the event of an untimely death. San Antonio residents can purchase several types of life insurance to cover their loved ones. A term life insurance policy is typically the least expensive and least complicated type of policy, making it a popular choice. This article will help you understand who should buy term life insurance and how such policies work when needed.
Term Life Insurance in San Antonio – What You Need To Know.
Last year’s sales numbers show that permanent life insurance is the most common type of policy. According to the research association, LIMRA– Among U.S. households with life insurance, 50% own only permanent life, 32% own only term insurance, and 18% have both life and term policies.
What Is Term Life Insurance?
Term life insurance is the most basic of all policies and provides a death benefit if the policyholder dies during the policy period. Term life policies are designed to provide protection in case of death during critical times in a person’s life, such as paying off a mortgage or other significant debt, getting married and starting a new family, or any other significant life moments. Term life insurance policies are only paid out to your beneficiaries if the policyholder dies during the time the policy is active.
Most people only need life insurance for a period of 20 to 30 years, long enough to cover a mortgage, growing children, or income-producing working years. If you’re considering whole life insurance, get a quote for a long-duration term life policy, such as a 20-year term, or a policy that covers you to a specific target age, such as 65.
About Term Life Insurance
There are two types of term life insurance policies; annual renewable term policies are year-long policies that are renewable each year. Renewable term policy premiums change based on the insured’s age at the time of the renewal. Level term policies are policies that provide coverage for a specific number of years, usually in 10 to 20-year increments. Level term premiums may change during the policy period.
Term life policies can be either convertible or renewable policies. A convertible policy has the option to be turned into a permanent life insurance policy without additional underwriting approval or an updated medical exam. A renewable policy is one that can be extended for multiple terms without additional underwriting or medical exam. Converting to a permanent policy offers many additional features over a death benefit only. Both convertible and renewable policies allow a continuation of benefits without additional medical information. Policy conversion is generally available only to policyholders under the age of 65.
Term Life Insurance Payments
When a term life insurance policy is paid, it is done in one of the following ways:
- Level Term Coverage – With level term coverage, the death benefit is the fully covered amount of the policy, regardless of when the policyholder passes and the benefit is paid. The full amount of the policy is paid out whether the death benefit is paid in the first year or the last year of the policy. This coverage usually has an escalating premium each year throughout the policy.
- Increasing Term Coverage – With an increasing term policy, the death benefits increase each year by a predesignated increment, as do the premium cost. A death benefit that was paid the first year of an increasing term policy would be at face value, while a policy paid out during the last year of the policy would be face value plus the additional yearly percentage benefit.
- Decreasing Term Coverage – A decreasing term policy pays gradually lower amounts every year, throughout the policy, and the costs of premiums usually remain the same throughout the entire policy period.
Here are a few life insurance tips that could save you from making costly mistakes.
Compare Policy Apples to Apples.
When getting price quotes on life insurance, be sure that you are comparing similar policies with the same coverages and benefit amounts. A $50,000 term life policy has lower premiums than a $50,000 permanent life policy. It’s important to talk to an expert to invest in the best coverage for your individual needs.
Never Name a Minor Child as Your Life Insurance Beneficiary.
One of the best reasons for buying life insurance is to provide for your children in case an unfortunate event happens, and you’re no longer around to provide for them. However, minors can not directly receive life insurance payouts. If you name a minor child as a beneficiary, the life insurance company can tie the money up until your beneficiary turns eighteen years old. Then they will receive the entire policy amount with no controls or oversight.
Parents should look into a life insurance trust for children that not only receives the money but also outlines acceptable structured uses. You can have your trust disburse specific amounts of money at certain milestone ages, like 21, 30, and 40. A trust is a sound option to set up for life insurance proceeds for your beneficiaries, especially if they are minor children.
Make Sure Your Life Insurance Policy has ‘Living Benefits.’
“Living benefits” have become a typical component of life insurance policies that allows you to access the death benefits yourself while you are still living as long as the situation meets specific circumstances. The access to tap into your policy this way could be beneficial if you become ill and need money to pay for living expenses or medical care, so make sure your policy has this feature.
Living benefits are generally considered policy “riders,” or policy extras, and include:
- An accelerated death benefits rider lets you access your payout if you are diagnosed as terminally ill. Rules vary but might consist of a life expectancy of 12 months or less. Accelerated death benefits may be included with your policy, or available for a slight extra charge.
- A chronic illness rider. A chronic illness rider allows you access your life insurance benefit without a diagnosis of a terminal illness. A chronic illness rider conditions will depend on your inability to do two or more “activities of daily living,” such as eating, bathing, and dressing yourself.
Be sure you understand what life insurance riders are available to you, and what events need to unfold to claim the benefits.
Include Your Payment With Your Life Insurance Application to Make the Policy Binding.
Include a check for the first payment along with your application, and that will bind coverage retroactively to that start date. This is an easy way to make sure your beneficiaries will have the protection in case something happens to you before your policy is officially processed.
Only Buy Insurance From a Reputable Life Insurance Company.
Your life insurance policy is meant to assist the people you love when you are no longer here yourself to provide for them. Do your research and only purchase your policy from a reliable life insurance company.
Choosing the right life insurance doesn’t have to be confusing. Discuss your needs and concerns with the experienced life insurance agents at Schuler Insurance Services. You can benefit from the expert knowledge of their professional insurance agents who deal with life insurance daily. They can direct customers just starting their life insurance search and help them avoid the pitfalls that can come back to haunt policyholders and their beneficiaries later on.