With statistics indicating that most people are considerably underinsured regarding life insurance, it's little wonder that offers for life insurance land in your mail box almost as frequently as credit card offering or sweepstakes entry forms. In fact, people are so used to purchasing nearly everything except groceries either through the mail or Online, that many who actually need insurance procrastinate. Unfortunately this could lead to costly mistakes.
Unlike something such as window purchases which are easy to see and come with guarantees, life insurance is not written in standardized language. While there are a couple of basic types, companies can create as many modifications as they like. For example, take a look at the following terms (which are by no means exhaustive) and ask yourself, if you were to purchase a mail order or Online policy of one of the following policy types, would you understand what you had?
Here's a little quiz for you. If you have trouble answering these questions correctly, you may want to consider relying on one of the licensed agents associated with our network to help you get the life insurance quotes that are best for you.
Answers: (1) D,I; (2) B; (3) B,C,H; (4) D; (5) F; (6) F,G; (7) G; (8)D; (9)F,G,I; (10)G
How did you do? Did you know that while Level Term Insurance is the most frequently purchase policy type, it will eventually become "annual renewable term"? That's because term life is usually purchased as "20 year level term life." The word "level" just means that the premium is unchanged for the first 20 years, but after that you have an annual rate increase which—if you can afford to keep it—will eventually be half or more of the actual face value. Also, be wary of the words "renewable to age 80," or whatever age is indicated on the policy. People often mistakenly think they are insured to a certain age, only to find out that if they do live that long, the policy lapses and probably cannot be converted or renewed. Furthermore, the rate increases may have started many years before the age of final renewal.
Decreasing Term is actually the least expensive of all types of insurance. This is because the benefit that will be paid is at the highest value in the first few years of the term—and very few people die in the first five years or so after purchasing a policy. After that, the actual benefit drops each year, although the premium remains unchanged. The longer you live, the less the insurance will have to pay until it gets down to just a few hundred dollars. This type is not usually sold by agents, but can be sold as mail order and is often sold as Mortgage life insurance today. The idea is that the value of the insurance decreases as your mortgage is paid off. The most common place to purchase this type of insurance is through a bank in a package with your mortgage. In most instances, if you can pass health underwriting for other options, decreasing term is likely not the best way to go.