| Managing The Cost Of Life Insurance |
Term Life Insurance rates have been depressed over the past decade, yet prices are expected to rise in the near future. Part of the reason for this is new government regulations that require them to set aside more cash reserves, and the recent market melt-downs. Additional cash reserves is intended as extra protection for rate-payers.
There are similarities to the way companies evaluate risk and rates, yet each life insurance company has a proprietary method for setting insurance rates. Many factors are evaluated by actuaries to establish life insurance rates.
It's still possible to get a very good rate if you know how to shop around for life insurance. Insurance companies don't raise their rates at once, so you may be able to catch a price break by doing a quote search. The longer you wait to buy coverage, the harder it will be to find economy pricing from an insurance company that has been slow to raise prices.
Relative to inflation, right now is the best time to buy term insurance since 1994 because rates have dropped precipitously since then. The insurance industry is only now beginning to recover their pricing power, so it's still possible to buy insurance at the last century's prices.
It's even a wise idea if you're in your fifties and early sixties to invest in life insurance and lock in a low cost policy now if you have college age children or a large mortgage that remains unpaid. As employers have pulled back from providing benefits in this economy, a self-financed life insurance plan can guarantee your spouse and children a degree of security should the worst come to pass. |
Here are the two basic types of life insurance: |
| Term Insurance |
This is the simples and cheapest type of life insurance. It means you are insured for as long as you maintain the policy, for a stated term. Term insurance is well suited for those on a limited budget, giving them peace of mind that their families will be taken care of in case the worst happens.
It can be positioned to pay off a large loan such as a mortgage or home refinance. Term life insurance is known for the low monthly payments for young people relative to the high payout. Insurers offer term insurance policies providing level premiums of 5, 10, 20 and 30 year terms.
Claims filed on term life insurance will be satisfied as long as the premiums are up to date, the insurance contract has not expired and if no claims are filed. There are no returns of premium dollars if no claim is filed by the insured.
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| Whole Life Insurance |
Unlike Term Insurance, Whole Life Insurance continues as long as you live and continue making premium payments. Because Whole Life Insurance premium levels are permanent, it is most economical when purchased when the insured is young.
Whole Life Insurance is set up to function not only as insurance, but as a kind of cash fund to assist you with short-term financial needs. As long as your policy remains intact, you can borrow against it and loan yourself money at the current interest rate. |
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