Smart Term Life Buying Guide (Companies + Rates)
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UPDATED: Mar 20, 2020
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I know you’ll agree that term life insurance is the most affordable option when planning for your future. Based on fixed rates, term life insurance, or pure insurance, with its flexible term options, offers the best plan for most families.
Want to see what policy can work for you? With only a few clicks, you can get a FREE quote now above for a term life policy that fits your budget and lifestyle needs.
What is term life insurance?
Term life insurance refers to insurance one can purchase for a period of time or for up to a specific age. It is the most straightforward insurance and is often called “pure life insurance.”
Term life insurance comes in the following five types: Level, Increasing, Decreasing, Renewable, and Convertible. There is no cash value with this type of policy because it only guarantees a death benefit to your beneficiary should you die during the term of your life insurance. The death benefit, however, can be used by the beneficiary in any way they choose, such as healthcare and funeral costs, mortgage payoff, debts, or other financial needs.
Term life insurance policies do expire when the term ends. Once the term ends, the coverage ends, as well, and the money you’ve paid in premiums is forfeit.
Term life policy premiums are more affordable than a permanent life insurance policy, but you do have the choice of premium you’d like to pay, and, depending on your financial needs and situation, one may be better than the other.
A guaranteed level premium allows you to lock in your rate for the duration of your premium, but if you choose to renew coverage at the end of your term, you will renew at a higher rate.
The other option would be an annually renewable term where the premium renews each year and increases as the policyholder ages. This premium does start at a lower rate than the guaranteed level premium but is not locked in, so you run the risk of an increasing premium over time.
When determining a policyholder’s premium rate, several factors are taken into consideration: mainly the insured’s age, gender, and health. A medical exam may be required for this, but keep in mind smoking status, family medical history, and occupation may also be considered.
Those who will benefit from this type of policy are young couples with children who will need the death benefit to replace the lost income and to pay for college tuition and expenses of their children should their spouse die during that term.
Couples may seek larger amounts of coverage to replace lost income if a spouse passes so they are able to address financial obligations and still live comfortably.
Term life allows couples this option because they can get substantial coverage at a low cost.
Determining How Much Term Life Insurance You Need
Making plans for your future and your loved ones in case you should die sounds daunting, but it’s an action you should consider, especially if you have children and are the major income provider of the family.
When determining how much coverage you need, think about your income, children’s college tuition, debts, mortgage payoff, and any other expenses. So, how do you calculate those amounts? There are helpful formulas to assist you in finding a policy that will work with your budget and situation.
The typical rule of thumb to get you started is 10-12 times your income plus $100,000 per child for college tuition and expenses. This is a basic formula but one that gives you an initial number to work with that can then be manipulated with financial obligations and resources to give you a final death insurance benefit.
The DIMEF method helps you analyze your personal needs and budget. Here is an easier and more individual breakdown of this method:
- Debts – Look at all debts that are not your mortgage
- Income – Take into consideration income that will be lost upon death so that spouse will be able to maintain a lifestyle they are accustomed to living presently — usually 10-12 times the amount of income
- Mortgage – Use the life insurance to pay off the mortgage so your family can remain in the house and that becomes one less stressor they will have to deal with
- Education – Consider college tuition and expenses for children
- Funeral expenses – Consider what you want your funeral to be like and the costs associated with it.
You can also take the L.I.F.E. approach to calculating how much life insurance you will need. With this approach, you should consider coverage of at least five times your yearly income plus enough that would pay for 100 percent of your debts.
There are three steps to consider with this approach:
- Step 1: Take the total sum of liabilities and debts, income to be replaced, final expenses, and education for kids
- Step 2: Subtract the amount of any savings or assets (this would be money your family would use immediately for any reason if you passed away)
- Step 3: If you currently own any life insurance policy (except coverage through your employer), subtract this amount
Term vs Whole
Whole life insurance is permanent life insurance that provides coverage for the life of the insured. This type of insurance provides both a guaranteed death benefit with the advantage of a cash value component.
The cash value component accumulates over the life of the policy on a tax-deferred basis. Cash value does give the policyholder a living benefit advantage because they can withdraw funds up to the value they’ve paid into it or can request a loan with interest.
Cash value withdrawals reduce the cash value amount but not death value amount. Loans made against the cash value, however, do reduce the amount of the death benefit.
Whole life insurance is built to cover you for life, with the expectation that you pass away before the policy expires. Most companies place a maturity date on the policy of 100 or 121, and most do not live past that date.
However, if the policy owner does live past the maturity date, the insurance company will pay the policyholder the cash value of the policy at face value in a lump sum.
A whole life insurance policy can also expire if the policyholder stops making payments or decides to surrender the policy.
There are many reasons for purchasing a whole life insurance policy, but a big reason would be because your loved ones are relying on you to take care of them financially should something happen to you.
When it comes time to sit down and talk about purchasing a whole life policy, how do you handle the premiums? Many factors should be considered when your premium is calculated. Think about how your coverage was designed, including any riders added.
A premium is determined by looking at your age, gender, health rating, family medical history, smoking history, and possible occupation hazard. The insurance company may ask you to get a medical exam, as well. These are all factors taken into consideration when calculating a premium.
There are some key differences between term life insurance and whole life insurance policies, one being that term life insurance is the most affordable.
To get a better understanding of how rates differ between term life and whole life policies, rates have been broken down based on non-smoking males and females.
Male Term Life Rates
Female Term Life Rates
Male/Female Whole Life Rates
If you are a smoker, even a casual or social smoker, you will pay smoker rates from your insurer. Smoker rates can be two times to three times higher than nonsmoker rates as evidenced in the table below.
|Demographic||$500,000/10-Year: Non-Smoker||$500,000/10-Year: Smoker|
As long as you are a smoker, you will pay the higher rates. However, you are considered a nonsmoker one year after your quit date. If you quit while you are insured, you can reapply or ask your insurer to reconsider your application at a nonsmoker rate.
As you can see, a smoking habit increases the cost of your premium payment for both term and whole life insurance.
Should you buy term or whole life?
Just thinking about life insurance and making plans for your future can be an overwhelming and stressful situation, but a necessary one — especially if you are married with young children.
To begin the process and to help you determine if you should buy term or whole life, think about the financial needs of your beneficiaries, as well as your financial goals.
You should take a number of variables into account when making your final decision:
- Income that will need to be covered
- Funeral and death expenses
- College tuition and expenses for children
- Mortgage and current debts
- Possible future needs of your family
If you are young, married with children, and the main income earner of the family, it would be a good idea to invest in, at a minimum, a term life insurance policy because of its affordability.
The length of the term would depend on your age and financial needs of your family.
Another option to consider is purchasing both term and whole life insurance. This option gives the benefits of both but the affordability and flexibility, as well. Why consider buying both policies?
- Can’t afford the cost of whole life insurance alone – purchase a $250,000 whole life policy and a $250,000 term life policy at a lower premium to give you $500,000 coverage.
- A need for more coverage for a certain period of time – the purchase of a larger home, the birth of an additional child, or another financial purchase causes the need for a larger amount of coverage for a specific amount of time and buying both policies lends itself perfectly to this situation.
When you combine policies, families are able to gain the benefits of whole life but boost the death benefit coverage to the amount they need with term insurance at a cheaper rate.
For most families, insurance coverage needs are greatest around their 30s and 40s due to children, mortgages, and education, so they are looking for coverage around $500,000-$1,000,000 for a reasonable rate.
However, buying a whole life policy outright is an expensive decision, where a term life policy is more affordable and gives the comfort of knowing the living spouse receives a death benefit upon your death (if within the term period). So what makes one better than the other?
|Coverage Term Limits||Yes||No|
Knowing your specific needs will help you make the right choice for you and your family.
Term vs Universal
Universal life insurance is a permanent life insurance policy that offers lifelong coverage but differs from whole life insurance in that it has lower premiums with a flexible payment option and a cash value benefit.
The cash value increases according to the policyholder’s portfolio performance, and you can use the cash value to pay for your premiums as long as there is money available. The cash value earns interest and can be accessed without affecting the death benefit amount. However, any money withdrawn will be taxed.
Loans can also be made against cash value without being taxed, but there will be interest calculated on the loan. Any unpaid loans reduce the death benefit by the outstanding loan amount.
Universal life insurance premiums are split between coverage cost and the cash value. You do have the option to pay a higher premium as long as it falls between the minimum and maximum amount.
Some policyholders choose to pay the maximum amount to build their cash value quicker and use the cash value to pay their premiums later. However, it is important to monitor your cash value amount so you do not run out, leaving you to pay the full premium, the possible lapse of your policy or a significant increase in your premium.
Universal life insurance does have a maturity date of either 85 or 121, with the date being determined by the insurance company. If you live past maturity date, you will receive a lump-sum payment and your coverage ends.
Differences Between Term Life & Universal Life Insurance
There are some key differences between term insurance and universal insurance, the main difference being the duration. “Term” is for a specific period of time, and “universal” is lifelong coverage.
Term insurance is pure insurance, so you are only paying for a death benefit if you should die during your period of coverage. Universal offers a guaranteed death benefit along with a cash value component you can withdraw funds from or borrow against if needed.
If a healthy, 30-year-old male purchased a term policy, his premium payment might be $20 a month as he is only paying for death-benefit coverage. If he were to purchase a universal policy, that payment might cost $120 a month with $40 going towards death benefit coverage and $80 to the cash value account.
If you are only looking for death-benefit coverage, a term life policy is enough coverage, but if you are interested in building cash value along with a death benefit, a universal policy is good as it offers flexible payment options with lifelong coverage.
Can you bundle term & universal?
Term-universal life insurance is an additional option of bundling term and universal policies, giving the policyholder the benefits of both policies: the affordability of term life and flexibility of universal.
With term-universal, the emphasis is on affordability and flexibility with premium payments. You can pay your premium at different times and in different amounts as long as you meet the minimum amount.
Term-universal life insurance gives individuals in their 50s and 60s the opportunity for coverage later in life that otherwise would not be available with traditional term policies.
This type of policy offers a 30-year term, which is unusual, so this length of coverage makes it attractive to those searching for an affordable and flexible insurance plan.
Term-universal policies allow for “a 1035 exchange” so you can move money tax-free between accounts, which is very popular with younger families with kids in college and mortgages to pay off.
Term vs Guaranteed Issue Universal Life
As you get older and your term life policy expires, there are still affordable life insurance options available. Guaranteed issue universal life insurance is not whole life insurance but instead resembles a term life policy designed to last your entire life.
Guaranteed issue universal life insurance does not build cash value, so this keeps the premium payments low for the insured, which is a great option for a family trying to stay within a certain budget.
Who should consider guaranteed issue universal life insurance?
A guaranteed issue universal life insurance policy is good for those wanting protection for their family once a term life policy expires.
A term life policy is good for those times when you have a mortgage to pay off and kids in college. However, as these debts diminish, financial needs shift and coverage choices change, and you find a need for further coverage but still at an affordable rate.
There are other reasons one might consider purchasing guaranteed issue universal insurance, such as being an owner of a small business, a long-term debt that continues well into retirement, or if you choose to leave an inheritance.
Variables to Consider When Purchasing
- The longer you live, the higher the chance of a death benefit payout to your beneficiaries; however, with this comes a higher premium cost.
- Costs less than a non-guaranteed universal life policy, so you will pay less upfront for the policy.
- As you age or if your health changes or begins to decline, the cost of insurance will not increase.
- You can design your policy to your specifications, budget and financial needs.
Can you bundle term & guaranteed issue universal life insurance?
You can bundle term and guaranteed issue universal just as you would a term-universal policy. Most term policies are convertible if you convert them within a certain time in your term policy’s expiration date or by a certain age.
When you convert to a guaranteed policy, you are guaranteed insurance without needing another medical exam; however, for this benefit, you may have to pay a higher premium, but a universal policy is still less expensive than a whole life insurance policy.
Shopping for Term Life Policies
When you’ve made the decision to purchase term life insurance to protect your family, you should be asking these questions.
Questions to Ask
Here are some questions to ask.
#1 – How long do you need coverage?
Look at your current situation to ascertain your coverage needs. If you are looking to cover a short-term debt, then a 10-year term would be fine. However, for someone needing to cover college expenses or mortgage for their loved ones in the event of their death, a longer term of 20 or 30 years would be a better decision.
#2 – Are there any exclusions to your policy?
The one exclusion you may encounter would be a cause of death that would void your death benefits, such as a risky hobby or high-risk occupation. There are some insurers that may deny coverage but others will offer coverage but more likely at a higher premium.
Risky hobbies would include skydiving, aviation, or mountain climbing, while high-risk occupations include jobs that put your life in danger daily. These jobs include truck drivers, commercial fishermen, underground miners, and electrical power line workers.
#3 – What options do you have when your plan expires?
As your term life insurance comes to an end, you may find you still need additional coverage for a variety of reasons, but looking for a new policy may be an expensive choice. However, if you have a renewable or convertible term life policy, you have another, less-expensive option.
With a renewable term life policy, you can extend your policy, and with a convertible term life policy, you are able to change your term life policy to a whole life policy.
Both of these policies are guaranteed acceptance without the need for a new medical exam.
What happens to your policy if you can’t pay? If you are unable to pay your premium, most insurance companies offer a grace period of 30-90 days to pay and bring your policy up to date. During this grace period, your policy is still active and you are fully protected.
If you are unable to pay your policy during this grace period, check with your insurer, as most will allow you to apply to reinstate your policy within a certain period of time of the policy’s lapse.
An add-on rider is an endorsement or additional condition you can add to your insurance policy. These riders will increase your premium payment but add additional coverage to your policy. There are many different types of riders you can add to your policy.
Accelerated Death Benefit
The accelerated death benefit provides early access to the benefit amount if they are diagnosed with a terminal illness that will end their life prematurely. The insured can use this money for treatment and all related expenses.
Any amount that is used will be deducted from what the beneficiaries would receive upon the insured’s death.
Waiver of Premium
The waiver of premium rider is beneficial for anyone who becomes disabled or unable to work due to injury or illness. This rider waives the premium until the insured is healthy and can return to work. This rider is especially helpful when the insured is the main income source for the family.
A term conversion rider allows the insured to convert their term life policy to a whole life policy without a medical exam; however, the premium will be at a higher rate.
Accidental Death & Dismemberment
Accidental death and dismemberment rider, or double indemnity rider, add additional coverage for death due to an accident. This rider provides a payout at twice the death benefit face value if the insured dies as a result of an accident.
A long-term care rider provides coverage if the insured needs to be placed in a nursing home or need in-home care by a nursing service. The rider pays monthly payments to cover the service as needed by the insured.
Tax Advantages & Disadvantages
How do you handle tax questions when it comes to your life insurance? There are ways for you to set up your policy so your beneficiaries receive their benefits without being taxed.
- When there is a one-time payout in a lump sum to the beneficiary, it is not taxed
- When there is a gain in cash value paid to the beneficiary, there is no income tax paid by the beneficiary
- Partial withdrawals from the cash value of permanent life insurance are not taxed
- Annual dividends earned are not taxable when they are added to cash value accounts; however, they cannot exceed premium amounts insured has paid out in that particular year
- If the need becomes necessary to accelerate your death benefit, you become the beneficiary, so you will not be taxed on the benefit received
- When the policy no longer involves the insured and the beneficiary, the death benefit becomes taxable income — a father purchases a policy for his daughter but names her husband as the beneficiary.
- If your estate exceeds the estate tax threshold of $11.4 million, the exceeding amount becomes taxable income for your beneficiaries.
- If you choose to sell your life insurance policy, if proceeds exceed premiums paid while insured, those proceeds become taxable income.
How to find cheap term life insurance rates?
Finding the cheapest term life rates isn’t as easy as running various prices from different carriers and choosing the lowest one. If you are new to purchasing life insurance, let me start by saying that the lowest quote doesn’t equal the lowest rate.
You must qualify for the cheapest amount. Yes, truth be told, life insurance companies cherry-pick their clients and charge them based on the overall risk they pose. An insurance company doesn’t have to approve your coverage.
In this post, I’ll go over a few tips you can follow to get the cheapest possible term life insurance rates. Let’s get this going!
#1 – Patience Is a Virtue, Except When Buying Term Life Insurance
We all love to procrastinate, it’s human nature not to think about death and finances. It is too dull. Only a few of us have traits that always makes us take the right decisions. I usually don’t speak with absolute certainty (I have been humbled before), but this time, I will say that your term life insurance rate today is much better than in six months or a year from now—guaranteed.
Your price will be in direct proportion to your current age (among other underwriting criteria). The younger you are, the less you would pay and vice versa. The older you are, the higher the price you can expect to pay. Unless you have a way to go back in time and grow younger again, please don’t delay the purchase.
If you know you need life insurance whether you are in your thirties or seventies, just buy it and get it over with. Don’t risk waiting. Not only might you develop a pre-existing condition which may preclude you from getting insurance, but you also will become older and will pay more.
#2 – Don’t Go to Your Local Property & Casualty Agent
Your State Farm or Farmers agent may be the nicest girl you know and may know a lot about automobile and homeowner insurance, but when it comes to shopping for the best term life insurance rates, they only offer one company: their company.
Not only is it more expensive than other top-rated companies, but because life insurance policies aren’t in their wheelhouse, they can’t recommend the right coverage for your unique situation.
Have you ever seen a TV ad where State Farm advertises about life insurance? Of course not, they only advertise about automobile insurance (for which they have excellent products). However, they sell life insurance policies to their original clients by offering a bundle discount. Even with the cut, you will be better off getting your term life somewhere else.
Avoid the agent who sells everything (the generalist). Opt for a specialist (broker) who can place you with the best company.
#3 – Don’t Buy Life Insurance Through Your Association
Getting it through your association is tempting. Whether you are a physician, accountant, or driver, there are associations that promise to negotiate the prices on your behalf and provide group-sponsored life insurance.
You may even tell yourself, “After all, it’s hard to believe they can’t get me the best rate. This is a large group.” Since you are a busy person, consider yourself very responsible, and your friend bought one, you do the same and purchase it from your association.
Without going off-topic here, many times, the policies that are sold through associations are a five-year term or annual renewable term. Most people don’t really understand what they’ve bought until it’s too late. Your best bet is to start doing the research before jumping into an association-sponsored plan.
#4 – Your Health Is Everything
My mom says that if you lost it all but kept your health, you can always start over. If you have your health, you have everything. When shopping for the best term life rates, your current and past health conditions will dictate your final prices.
After all, the insurance company is on the hook for the death benefit amount if you die soon after buying the coverage. This brings me to the subject of staying healthy. You must do everything in your power to remain healthy, whether it’s your morning runs or eating your vegetables.
I can’t tell you how many times insurance companies were charging clients 25% or higher because they are overweight. If you are a smoker, work hard to ditch the bad habit. Not only will your life insurance policy cost less than your monthly smoking allowance, but your family would be happier also.
There are a few things you can do that can dramatically decrease your life insurance rates, and those two are at the top of the list.
#5 – 10-Year Costs Less Than 20-Year; 20-Year Costs Less Than 30-Year
Term life insurance provides fixed premiums for your chosen duration. The longer the term, the more you would pay. This brings me to a simple point that most people overlook: If you have seven years left on your mortgage, there is no reason for you to buy a 30-year term.
Be laser-focused on the type of term you need, and only buy that. Now, if you have a mortgage to protect and also want to protect your income until your daughter finishes college in 20 years, consider the layering or stacking approach.
You can buy two policies instead of one large policy to cover both expenses. Instead of buying a sizeable 20-year policy to cover both mortgage and income replacement, just buy one policy for 10 years and another for 20 years. In 10 years, you will only have one policy left to pay instead of two.
#6 – The Insurance Exam Is Your Best Friend
Don’t skip the exam if you want to pay less for term life insurance! Yes, you are paying extra for the convenience of not taking the exam and for the higher risk an insurance carrier is taking by not getting a full picture of your health.
Now, don’t get me wrong. If a client calls me and needs to get life insurance as soon as possible because he is part of a divorce settlement, I would recommend getting a no-exam life insurance policy. However, I would never suggest it to a client who has time (underwriting can take four to eight weeks) and doesn’t need the policy today.
Also, many agents will push this type of coverage because the quicker you get your policy, the sooner they get paid. Make sure you have a reason you would want to skip the exam; it sure can’t be because your broker said so.
#7 – Don’t Get Quotes from a Company Directly
Let me explain. If you start by going to AIG, Banner, Prudential, or Haven Life, they can only quote you their rates. Prices are fixed by law, so whether you buy a policy from AIG directly or a broker who represents AIG, the prices are the same.
Your job is finding a website that can display unbiased quotes from as many companies as possible so that you can compare and choose the best one.
Here is a clue: the form on the right, on this website, will display quotes from more than 50 insurers. Go ahead and give that a try.
#8 – Living on the Edge Won’t Save You Money
If there is a single parameter all insurance companies hate with a passion, it’s increased risk. Your health isn’t the only risk they care about. If you love skydiving, scuba diving, or mountain climbing, I have some bad news for you. You will pay a lot more for life insurance or not even offered coverage at all.
It also goes for driving fast or having driving violations on your record. Slow down, stay safe, you will be glad you did. I can’t tell you how many times perfectly healthy people pay a higher rate because they have a heavy foot when driving a car.
#9 – Seriously, Just Say No to Unnecessary Riders
If there is one thing I despise about marketing, it’s the up-selling or cross-selling approach. All sales gurus practice this method. It goes like this: if a client just made a purchase, they are more inclined to make another one, so you, the salesperson, just have to shove it upon them.
Riders are add-ons to a life insurance policy to enhance or customize it considerably. Riders, such as the return of premium or term life insurance for children, not only add extra costs but aren’t necessary.
#10 – Hunt for a Broker Instead of Deals
I saved the best for last. Unlike buying the cheapest hotel or flight rates, life insurance is a more in-depth purchase and should never be handled as click and buy.
There is too much fine print to be aware of before making the purchase, such as the contestability period, conversion options, and clauses among many others.
Indeed, it is in your best interest to find a broker who can be on your side when making a crucial buying decision. The good news is that brokers don’t charge a fee. They are getting paid by the insurer, and in fact, are prohibited by state law from charging a client (they can lose their license).
Do more research on the broker you are about to work with than trying to get the best term life insurance deal. Go and read online reviews, ask a few questions, and get to know him/her.
A good broker is hard to come by, but if you find one, you will not need to read all the tips above because he/she will do the right thing and place you with the best company for your unique health and financial situation.
Best Term Life Insurance Companies for Seniors
There are many reasons seniors seek term life insurance. The primary purpose is an income replacement solution since most of them still work and have people who depend on them financially.
According to the U.S. Bureau of Labor Statistics (BLS), about 40% of people ages 55 and older were working or actively looking for work in 2014. This number, known as a labor force participation rate, is expected to grow significantly through 2024, especially for people ages 65 to 74 and 75 and older.
Here are two primary reasons seniors seek term life insurance:
- Expired group plan: Many individuals never bought life insurance for themselves. They relied on an employer-sponsored plan to meet their need for protection. However, when they retired, they had to say goodbye to their coverage as well, or pay an excessive amount of money to keep all or part of it because the company is no longer paying for it as they are no longer a company employee.
- Outlived an individual term plan: Many seniors bought a policy 20 or 30 years ago when they had their first home or started a family. Since life rarely goes according to one’s plan, events such as marriage, divorce, or getting a business loan may call for new coverage. Extending their current term plan is feasible, but buying a new term life insurance is more economical, notably for those in good health.
How does term life for seniors work?
Term life insurance is also called temporary protection because it is intended to last for a specific duration, usually from 10 to 30 years. The premium payments and death benefit are guaranteed to stay the same for your entire chosen length.
At the end of the term period, you may convert it to a permanent policy before the insured’s 70th birthday (with most companies) without partaking in the exam or underwriting process, continue to pay annually until the age 95 (depending on the company), or drop the policy.
When seniors buy term life, they pay attention to these facts:
- The maximum face value: Most insurance carriers allow individuals to purchase the maximum face amount based on earned income debts and overall need. They use an income factor table to calculate the estimated value: the younger you are, the more insurance you can buy, and the older you are, the less they allow as the need for protection diminishes. For instance, if you are over the age of 50 years old, you can expect 15–20 times your yearly income, 61–70 only 10 times, and 71–80 only 5 times.
- The maximum term length: The older you become, the shorter the term period you can receive. After all, insurance companies are in the risk assessment business, and as your age increases, so does the risk you pose. Here are the term periods that you can expect based on your age:
- 10-year term up to the age of 80
- 15-year term up to the age of 75
- 20-year term up to the age of 70
- 30-year term up to the age of 55
- Owning a term policy with a conversion clause allows you to convert part or all of your coverage to a permanent policy, usually, at the end of the guaranteed level premium before a particular age, depending on the company. The best part is that you are guaranteed coverage with no needed exam or underwriting process. Why should you pay attention to this fact?
- If you bought your policy at age 60, some companies would only allow conversion up to the age of 65 while other 75. It becomes paramount to consider this option.
- It’s not as relevant to pay attention to it if you bought your policy at age 70 or older. You don’t have a conversion period—you’ve already passed it.
Here Are What I like to See When Recommending Coverage for Seniors
First, let’s start with age.
Age Last Birthday Rates
Age is one of the primary factors in estimating your rates. It’s straightforward. The older you are, the more you’ll pay, and the younger, the less. This is why it’s imperative for seniors to get their current age rates rather than near age.
Let’s differentiate between these two:
- Last birthday or actual age is your real age on any given day. Even a week before your birthday, you are still a year younger.
- Nearest age assumes your age based on how close you are to either the last or next birthday. In other words, if you are 50 years old and seven months, you are considered 51 years old because there are only five months until the 51st birthday.
Takeaway: You’ll be surprised to know how a one-year age difference can translate into huge savings on premiums—especially for those older than 70.
Liberal Height and Weight Charts
Let’s face it. The older we become, the harder it becomes to keep the weight off. Insurance companies will charge you more for your extra weight even if you go on a starvation diet and lose weight for a whole year. Many times, insurers add your lost weight in the past year to your actual weight at the time of application.
However, being a broker gives me the extended underwriting knowledge into which companies have distinct height and weight charts for those who are 60 and over as opposed to younger individuals. In other words, they allow more lenient values to qualify for better rates.
Moreover, some companies offer unisex charts which give women even higher ranges to be eligible for favorable prices. For instance, a male over the age of 60, 6’0” 228 pounds can qualify for preferred rates. If he was under the age of 60, he had to weigh under 213 pounds to get the same price.
A few companies use underwriting credits to offset various health issues, which generally call for increased prices by granting “credits”, consequently reducing the rates.
It’s a way for the insurance company to underwrite the person as a whole rather than his/her condition. For example, if you are overweight or have diabetes, a company may use your favorable criteria such as reasonable blood sugar control to offset debits for diabetes. This can improve your Table 3 rating to a Standard. In other cases, it can enhance your Standard health class to Preferred.
Most seniors are thrilled to discover that they don’t need to undergo an exam as part of the underwriting process. As a broker, I’m happy to offer such an advantage, provided you are comfortable paying more for it as opposed to taking the exam.
There are a few companies that provide accelerated underwriting process for those who are in their 50s without charging them extra. The accelerated option starts with a phone interview, during which the underwriter decides to either skip the exam and issue the coverage or order an exam and continue as a fully underwritten policy. Make sure to choose the accelerated underwriting option whenever possible.
3 Best Companies for Seniors Who Seek Term Life Insurance
Let’s take a look at the top three companies that best fit seniors who seek term life insurance. When I selected these companies, my main objectives were:
- Must be competitive, price wise
- Have high financial ratings
- Geared for the seniors’ market by providing friendly underwriting guidelines
Lastly, if you have any medical ailment, you will not get the preferred rate, and I advise you to talk to a broker so that he/she can recommend the best company for your situation.
One of the most recognized brands in the life insurance industry among brokers and clients, Prudential is a Fortune 500 company who was founded in 1875—144 years ago. It has an A+ (Superior) financial rating according to A.M. Best. Prudential is probably the best carrier for those with pre-existing conditions as long as it’s well controlled.
- Minimum face amount: $100,000
- Liberal height and weight charts for those over 60
- Underwriting credits
- Great for those with pre-existing conditions
- Age last birthday
- Issue ages:
- 10-year plan up to 75 years old
- 15-year plan up to 70 years old
- 20-year plan up to 65 years old
- 30-year plan up to 55 years old
- Conversion option: up to the age of 65 or at the end of the initial level-paying period, whichever comes first
- Accelerated rider at no additional cost
- Optional riders:
- Waiver of premium
- Accidental death benefit (AD&D)
- Children’s term coverage
Prudential’s Monthly Rates
10-Year Level Term Male
10-Year Level Term Female
Another huge brand which was founded in 1928, Transamerica is known for investment and retirement services, and it has an A+ (Superior) rating according to A.M. Best. One of the greatest advantages Transamerica offers is the conversion period up to the age of 75 if you qualify for the best health class.
- Minimum face amount: $25,000
- Liberal height and weight charts for those over 71
- Underwriting credits
- Age last birthday
- Issue ages:
- 10-year plan up to 80 years old
- 15-year plan up to 78 years old nonsmokers 73 smokers
- 20-year plan up to 70 years old nonsmokers 65 smokers
- 25-year plan up to 65 years old nonsmokers 60 smokers
- 30-year plan up to 58 years old nonsmokers 53 smokers
- Conversion option: up to the age of 70 (Standard rate) or 75 (Preferred Plus)
- Accelerated rider at no additional cost (not available on all plans)
- Optional riders:
- Waiver of premium
- Accidental death benefit (AD&D)
- Children’s term coverage
- Non-medical underwriting up to the age of 60
- Up to $99,999 on Trendsetter Super
- Up to $249,999 on Trendsetter LB (Living Benefits)
- Standard rate only on a no-exam life policy.
Transamerica’s Monthly Rates
10-Year Level Term Male
10-Year Level Term Female
Legal & General Group, commonly known as Legal & General, started in 1836 when six attorneys met in a London coffee shop where they discussed life insurance. Since then, Banner Life has expanded outside of the United Kingdom, holding investment operations in Asia, the Gulf, and many international markets.
In 1981, they entered into the US markets and they currently have one of the best life insurance ratings, A+ (Superior), according to A.M. Best. Banner has also excellent underwriting guidelines geared towards people with health issues.
- Minimum face amount: $100,000
- Issue ages:
- 10-year plan up to 75 years old
- 15-year plan up to 75 years old
- 20-year plan up to 70 years old
- 30-year plan up to 55 years old
- Accelerated underwriting up to the age of 50
- Underwriting credits
- Conversion period before the age of 70
- Accelerated death benefit at no additional cost up to 75% or $500,00 whichever is the lesser
- Optional riders:
- Waiver of premium
- Additional term insurance
- Children’s term coverage
Banner’s Monthly Rates
10-Year Level Term Male
10-Year Level Term Female
*All rates quoted on this page are for a super-preferred healthy individual who does not use tobacco. Monthly rates are updated as of Jun 2019 and are subject to underwriting approval.*
Expired Term Life Insurance Policy
Congratulations! You outlived your term life insurance and are fortunate enough to be alive. Typically, if you bought the correct face amount and term length for your circumstances at the time, then celebrate, you don’t need it anymore.
Drop the policy and get busy living. You paid a small price to protect the last 20 or 30 years of your life. However, the original question remains. What happens if you still need coverage? What options do you have then?
This post will reveal the five ways to deal with expired term life insurance.
Your Term Life Insurance Policy Doesn’t Mature
Technically, your term life insurance doesn’t mature. With most term life policies, you are covered until the age of 95. What is really ceasing is your “initial level term period”.
When you buy term life insurance, whether it’s a 10-, 20-, or 30-year duration, you gain the peace of mind that your premiums and death benefit will remain the same throughout the chosen period.
The longer the term, the more expensive the premiums are. A 30-year term costs more than a 10-year term, but you get the assurance that your premiums will not increase for the next 30 years.
What happens when the term expires?
Let’s examine some of the options you may face at the end of your initial term period. The five scenarios below will depend on the type of term policy, your age at the end of the term, and the company you purchased the policy from.
#1 – Annual Renewable Term (ART)
This is plausibly the worst choice to exercise at the end of your initial term policy because of the costs that grow exponentially every year. If you choose to keep it, you will not have to go through underwriting or prove insurability.
Your coverage is guaranteed (which is probably the only good news). However, your premiums will be determined based on your attained age (age at the end of the term) and will continuously increase as you get older.
Let’s take a look at this example below: A 30-year-old male purchased a $500,000 20-year term coverage for $231.48 per year. In this instance, he is guaranteed the annual premium to remain fixed until the age of 50.
After that period has ended, you can see from the illustration that the premium will drastically increase on an annual basis until the age of 95.
In a nutshell, he has another 45 years to keep the policy if he so desires but at astronomical yearly costs.
- At year 21 or age 51: $5,050.00 per year
- At year 22 or age 52: $5,490.00 per year
- At year 23 or age 53: $6,085.00 per year
- At year 24 or age 54: $6,735.00 per year
Takeaway: Typically, the only time an individual may choose this option is when they face terminal illness and are expected to die shortly after. Most will shy away from the annual renewable option since it doesn’t make any financial sense.
#2 – Did you buy return of premium life insurance?
Return of premium life insurance (ROP) is a term insurance policy that returns the premiums paid by the insured at the end of the term period.
If you purchased a 20-year term and outlived the term period, be on the lookout for a lump-sum check from the insurer. If you paid $100 per month for 20 years, you would get $24,000 after your term ended.
Takeaway: Most people do not buy this type of coverage because it costs two to three times as much as traditional term life, and you don’t get any interest on your money. In fact, you give the insurance company free money to invest it for their own benefit. You are probably better off buying term and investing the difference or putting it aside.
#3 – Converting Your Coverage
Most term life insurance comes with a conversion clause, which allows the insured to convert all or part of the coverage amount to a permanent policy.
This option doesn’t require you to undergo an exam or prove insurability, and you will be entitled to get the same health classification as when you first signed up for the policy, even if your health has deteriorated over the years.
There are a few pitfalls for this choice:
- You are at the mercy of the insurer’s products at the time of conversion. This means you may want whole life but will only be offered universal life or another product. Your choices are limited, and you have no control over the products they will provide in the future.
- Not all companies will let you convert at the end of your term. It’s probably the biggest misconception about the term life insurance convertibility option. The convertibility option comes with two exclusions: The first one is that you must convert it before the age of 70 (with most companies). The second one is that some companies allow conversion during the first few years of the policy, not at the end of your term, so you may anticipate the end of your term only to find out that you just missed the conversion option either by being over the age of 70 or by forgetting that you only had a few years at the beginning of the coverage years. For instance, if you buy a 10-year term policy from Protective Life, they will only allow conversion in the first eight years, not at the end of your term.
Takeaway: Regardless of when your term expires, make sure you convert it before the age of 70 or during the period the insurer allows. Many who buy life insurance in their early years are not aware or forget about it, which causes frustration at the end of the term policy.
#4 – Drop Your Coverage
Ideally, if you bought the right amount at the time you needed it and haven’t accumulated more debts, you probably don’t need the current policy.
It served you well when you and your family were younger, had a mortgage and many financial obligations that needed protection for the unexpected. Now, the children are grown up and aren’t dependent on your income, and the mortgage is paid off.
During the last 30 years, you also earned enough cash to build your nest egg and are considered self-insured. In other words, you have no need in a life policy, so dropping it makes practical sense.
#5 – Apply for a New Coverage
Before you do so, there two critically important questions you must ask yourself:
- How is your health?
- How much do you need?
Let me explain the logic behind these two questions:
- Remember that you are 20 or 30 years older, now, and may have developed pre-existing conditions which could disqualify you from getting coverage at all. If your health is poor and you still need coverage, convert your expired term to permanent coverage or consider guaranteed issue life insurance.
- Figure out the reason you need coverage. The reason you require it will also help you in determining the relevant policy for your circumstances. For instance, if you just remarried and need more than $100,000 in death benefit, you will need a term or guaranteed universal life policy. If, however, you only need small burial insurance, just opt for a final expense type of coverage that comes with fixed premiums throughout your lifetime.
Pros & Cons
Term life insurance is the most affordable insurance for most people, especially if they are looking for coverage for a period of time or specific short-term reasons.
- Straightforward, affordable, and there are no hidden fees or risks associated so they are easy to understand
- They are pure insurance – you pay a premium so your beneficiary receives a guaranteed death benefit should you die during that term
- You are able to cancel the policy before its expiration without losing any value
- There are fixed premiums so you can lock in your premium payment amount
- Once your policy term expires, you forfeit your money and your coverage ends
- There are escalating premiums so as you age, the premiums increase, especially if your health is declining
The Bottom Line
Even with a term limit and no cash value, term life insurance is a good choice for most families.
Is there a specific reason that makes you choose one over the other? Think about your budget and financial needs to help you make an informed decision about the policy you choose.
Interested in a term life insurance policy? Get started now with a FREE life insurance quote below.