If you’re considering term life insurance replacement, use the worksheet provided here to help make your decision easier. This worksheet summarizes some important factors to consider. Not all of these factors necessarily apply to your situation. It is not an exhaustive list, but it covers the most likely scenarios.
It’s a good place to start deciding whether or not to replace an in-force term policy with another one.
Term insurance generally does not pay dividends and does not accumulate cash values. These policies run for a specified period of time and expire without value at the end of that term. During the term, it provides pure life insurance protection in the amount for which you contracted with the life insurance company.
A good example is a one million dollar 10-year term policy. If the insured dies during the 10-year period, the policy pays the one million to the designated beneficiary. On the other hand, if the insured person dies after the 10 years is up, the policy pays nothing.
Many term policies are renewable at a higher premium rate, and many are convertible to permanent life insurance at any time during the policy term.
Term policies come in many forms. The most common are annual-renewable term, decreasing term (e.g., mortgage cancellation insurance) and level-premium term. Some policies offer guarantees, while others do not.
You may also want to record the comparison information you are given, the source and the date. Try to verify that the information is current because you will be making a decision based on this information.
Steuer, author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, has more than 25 years of experience and holds the Department of Insurance Analyst License (LA) as well as the Charted Life Underwriter (CLU) designation. Tony holds various leadership positions and has authored three books on the topic of life insurance.
Steuer’s work has been awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy for his The Questions and Answers on Disability Insurance Workbook and The Questions and Answers on Insurance Planner. Forbes named Questions and Answers on Life Insurance: The Life Insurance Toolbook as one of their top nine great investment books.
He’s also the founder of the Insurance Literacy Institute and creator of The Insurance Bill of Rights designed to empower consumers and to identify members of the Insurance Industry dedicated to strong professional standards.