What is considered affordable life insurance to one consumer may be seen
as expensive life insurance to another.
The amount of spendable income an individual has helps determine what is really affordable life insurance.
Term insurance is of interest to most people who buy life insurance. They have great plans for themselves and their families.
They feel that as long as they are alive and working they can and will accomplish these goals, however, if they should die before their children finish their education, before the new home is purchased for the family, or before they have accumulated sufficient funds for retirement the family could be left in deep financial trouble.
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These needs can be taken care of with adequate life insurance. Let us
look at some of the types of life insurance policies you could buy and
their comparative costs.
We will discuss term insurance first bearing in mind that with this type of insurance you are paying for death benefit alone. There are no other benefits to term insurance.
The insurance company only pays when you die which is what people are most interested in when they buy life insurance.
30 Year Term Insurance
20 Year Term Insurance
15 Year Term Insurance
10 Year Term Insurance
5 Year Term Insurance
Yearly Renewable Term Insurance
Whole Life Insurance
Because of the great competition between the life insurance companies and the resulting decreases in premiums the
30 year term life insurance policy
can be categorized as affordable.
This is a good thing as 30 year term is considered a good replacement for the whole life policy. It is much cheaper than whole life and is quite affordable.
The premiums remain level for 30 years. If you examined mortality tables, used by actuaries use to determine premium rates, you would notice that the mortality costs for the 30 year term is a little high in the initial years, however, it averages out nicely over the 30 year period.
The death benefit is guaranteed to remain level for the life of the policy.
Another plan that some consider to be affordable life insurance is the
20 year term insurance policy.
This is similar to the 30 year term but only for a shorter period of time. It contains quite an inexpensive
guaranteed level premium
for the 20 year period.
The guaranteed face amount also remains level. The death benefit can be paid in one lump sum or in the form of a monthly income. This is one of the most liked and most bought policies.
Some life insurance companies sell a
15 year term policy
which is also affordable life insurance for many people. With the
better life insurance companies
the premiums are level throughout the life of the policy.
The death benefit for this policy is guaranteed to stay level for the duration. This can also be paid out in the form of a monthly income but most people take the money in one lump sum.
People used to buy the
10 year term policy
much more than they do today because of the low premium. Although this
policy is for a fairly short period it is still very popular.
As with most term policies you have the option to convert the policy at any time during its life without evidence of insure-ability. This is truly affordable life insurance. It has a guaranteed level death benefit and also a guaranteed level premium.
Affordable life insurance does not get much better than this.
The only problem is the short duration of the policy. You, however, have
the option of converting the policy to a
permanent type of insurance
Even if your health has deteriorated since the date you purchased the policy the insurance company has to convert it at your request. The death benefit is level for the duration and so is the premium.
yearly renewable term life insurance
policy is initially a truly affordable life insurance policy. As a matter of fact it is cheaper than all of the above
life insurance policies
in the initial few years.
This is insurance in it's purest form. The premiums increase every year. You are paying what the insurance really costs each year. The problem is that after a few years the costs can be prohibitive for most people.
In later years it turns out not to be affordable life insurance any more. It has a level death benefit.
and it's derivative policies are considered expensive life insurance by
most people. Some people, however, do consider them to be affordable
life insurance policies.
The truth depends on how you look at this policy. If you have the additional cash to put into your policy it may be worth it in the long run. Whole life policies have guaranteed cash values on which you may earn dividends. Dividends are not guaranteed.
If you buy your policy from a company that performs well you could end up getting back all the premiums you put in the policy if you don't die. This can work out to be quite a good deal for you.
The nay sayers argue that the extra money put into whole life
would give you a higher return than had it been put in other
investments. That is quite possible or even likely.
Bear in mind that many people will not invest the extra money and if they do it is also possible that the investment may or may not be profitable.
The whole life policy has a guaranteed death benefit, a guaranteed level premium and a guaranteed cash value. I repeat, this may be considered affordable life insurance for some.
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I recently did some research on the development of the 30 year term insurance policy over the years. What I learned was quite interesting.
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