15 Terms Consumers Should Know When Shopping for Term Life Insurance
Consumers have so many options to choose from when it comes to life insurance coverage. As you research some of your life insurance options, you might come across terms you’ve never heard before. We are constantly trying to educate consumers about life insurance so that they can be confident when they are ready to purchase. We have listed 10 important terms that consumers should know when shopping for life insurance to help make the process easier. Knowing these terms, should make the overall process a little less intimidating.
- Level Premium Term Life Insurance – This type of insurance offers coverage that lasts for a specific period of time such as 10, 20 or 30 years. Premiums do not change for the chosen duration. Level premium term coverage is a simple product that offers the most cost effective long term coverage.
- Return of Premium Term Life Insurance (ROP) – This type of term life insurance coverage is similar to level premium term, but it allows you the opportunity to get back all of your premiums if you outlive your policy. Before you consider ROP coverage, you should know that you will only get back 100% of your premiums if you keep the policy for the full duration. If you cancel your policy or let it lapse any earlier than the full duration, you will receive a smaller percentage of your premiums.
- No Medical Exam Term Life Insurance – If you do not want to take a medical exam, you can opt for no medical exam term life insurance. Some no medical exam policies, such as simplified issue policies, ask some basic health questions. You can also apply for guaranteed issue coverage which offers a waiting period before the entire death benefit can be paid out but does not ask any medical questions.
- Underwriting – Underwriting is the process used by the insurance company to classify you in terms of your risk as a potential policyholder. Life insurance companies use your application, paramedical exam results, motor vehicle report, pharmacy database report and other sources to assess your risk. It might even request your medical records.
- Paramedical Exam – For fully underwritten policies, you are required to take a paramedical exam. It is simply an abbreviated medical exam that can be administered in your home or office that takes about 20 minutes to complete. The examiner will take your height, weight, blood pressure, blood sample, urine sample, EKG (depending on your age and size of the policy) and ask you some medical questions.
- Policy Riders – Policy riders are features that you can add to your base policy for an additional premium. Riders such as the children’s term rider, waiver of premium rider, critical illness rider and many others can be added to your base policy to enhance your coverage.
- Conversion Privilege – A conversion privilege allows you to convert your term coverage to permanent coverage without proof of insurability. You can keep your original health class rating at conversion even if your health has deteriorated since you originally purchased your policy.
- Risk Classification – Your risk classification is determined after underwriting and dictates your premium after factoring in your age and gender. An example of risk classifications from best to worst would be ‘Preferred Plus’, ‘Preferred’, ‘Standard Plus’, ‘Standard’ and ‘Substandard’ or ‘Table Rated’. There are also separate ratings for tobacco users as well.
- Beneficiary (Primary and Contingent) – Your primary beneficiary is the person named in the policy to receive your death benefit should you pass away. Your contingent beneficiary will receive the death benefit if your primary beneficiary cannot collect.
- Premium Mode – You have several choices as to how often you can pay your premiums. You can pay them annually, semi-annually, quarterly or monthly. If you choose to pay your premiums in any way other than annually, most companies charge a convenience fee. Also, most companies require monthly payments to automatically be withdrawn from your bank account.
- Attained Age (Age Last Birthday & Age Nearest) – If you’re 40 years old, you are probably assuming that the insurance company will consider you to be 40 years old. That’s not necessarily true. Your attained age is based on guidelines set by each insurance company. If the insurance company uses ‘Age Last Birthday’, it will use your age in actual years. For example, if you are 40 years and 9 months old, you will be considered 40 years old by the insurance company. If the insurance company uses ‘Age Nearest Birthday’, then you would be considered 41 since you’ve celebrated your half birthday.
- Backdating Your Policy to Save Age – Now that you know how insurance companies determine your age, it is important to know a strategy used to lock in a lower rate if you are right on the cusp of an age change. Insurance companies let you change the effective date of your policy up to 6 months so that you can qualify for a lower age which results in lower rates. You would still have to pay for the months you technically didn’t have coverage, but the savings over the long haul could be worth it.
- Misrepresentation – It is important to always be truthful on your life insurance application. If you make any material misrepresentations on your application, it could hurt your beneficiaries if you pass away. If you die within 2 years of starting your coverage and the life insurance finds out you made material misrepresentations on your policy, it could deny your claim and leave your beneficiaries financially devastated.
- Financial Rating – Each life insurance company is rated by several independent agencies such as Standard & Poor’s, A.M. Best and Moody’s. A strong financial rating of ‘A’ or better shows the company is likely to meet its financial obligations to policyholders.
- Free Look Period – Did you know that you can actually return your life insurance policy for a refund? If you purchase a policy and change your mind, the free look period offers you the opportunity to return your life insurance and get a refund on your premiums paid. The free look period usually lasts 30 days after the commencement of your policy.
Be Informed Before You Buy Life Insurance Coverage in California
Our goal is to help consumers make informed decisions when it comes to buying life insurance. Securing life insurance coverage to protect what’s important to you shouldn’t be overwhelming. We make the process easy so that you feel comfortable with your choice of coverage. If you would like a free no obligation consultation, give us a call at (877) 205-4172 or email us at firstname.lastname@example.org.
Term Life Answers was created with the main goal of finding consumers the best rates on life insurance. If you are looking for the best rates for life insurance, we can help. We shop the top life insurance carriers in the industry to match you with the company that best fits your situation and offers the best rate. If you have any questions about your life insurance needs, life insurance products or your existing coverage, feel free to give us a call at (877) 205-4172 or email us at email@example.com .