Permanent and Term Life Insurance
Life Insurance is offered in various forms for an individual and is exactly what it says it is. A life insurance policy is a contract between a life insurance company and a proposed insured. The insured of the policy is not necessarily the owner. A person can own a policy on himself, his spouse, or his children. A corporation or a bank can own a policy on its employees. The only question the insurance company must have answered is, "Does the company or corporation have an insurable interest on the life of the insured?" The real question that you should ask yourself is: "Is my full Human Life Value" properly insured to fully secure the future of my family and/or my business?" This is not a question that you are adequately trained to answer. Please seek the advice of a trusted insurance and financial advisor. Financial advisors whose business is primarily focused on the equity markets such as stocks, bonds, and mutual funds are not usually competent at assessing your true Human Life Value. Once again, specialization is a very key element.
There are only two kinds of life insurance: Permanent and Term life insurance. Term life insurance is exactly what the name implies. Term insurance should be purchased for a temporary need and is for a specified term of time. One year term or annually renewable term goes up each year on the policy anniversary date. In the earlier parts of life the annual increases are slight, but later in life the increases become much more significant. Universal Life and Variable Universal Life both have one year term inside them for their insurance component. We will discuss this later when Universal Life is addressed. There are also 5 year term, 10 year term, 15 year term, 20 year term and 30 year term plans. Twenty and thirty year term products may not be purchased by "older" individuals. Most plans can be renewed at the end of the initial period of time, but the price is so high most people do not renew.
Most term plans have some type of conversion option that allows the insured to convert to a permanent policy at his/her new attained age, but locked in at the original health risk that was received when the policy was first issued. If an individual received a preferred rating originally, he/she will never lose it no matter how his/her health has changed. Please check out your term plan at the beginning to make sure you know your conversion options. There may be limited options or none at all. No one wants to be trapped in a term plan and have an uninsurable health condition develop and not be able to convert to a permanent insurance plan.
Term insurance is a great short term inexpensive product for when you and your spouse are raising your children. It is especially important during the college years, or when you are carrying heavy debt. Please remember, the need for life insurance never goes away. There are different types that address different needs and time periods of life. We all need life insurance during the Creation Phase of life (age 25 to 65). The Preservation years (age 65 to 85) of your life need to be protected as well, and life insurance is definitely needed during the conservation phase of life at death (about age 80-85). So, in short, there are the Creation Phase of life, the Preservation Phase of life, and the Conservation Phase at death. Term insurance is affordable only during the Creation phase of life. Permanent life insurance must be purchased during the creation years as well so that it will always be around throughout the latter two stages of life.
The other type of life insurance is called Permanent life insurance and it is characterized by its ability to last one's entire life.
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