Term insurance is one of the most valuable life insurance products in the market. As you know, it provides life insurance for a “term” of time. In today’s marketplace, it has evolved from an annual increasing premium concept to a level premium structure offering level premiums for 10, 15, 20 or even 30 years.
There are riders that can be attached to the policy giving the contract more value-added features. If a client should face a disability, adding disability waiver of premium can be included and the insurance carrier will pay the life premium. Return of premium can be included by a rider or even issued as a stand-alone policy. Here the carrier will charge the extra premium so at the end of the term, all the payments are refunded. Child riders can be a good addition to the policy and protects the insurability of the children in the family…giving them a start.
The risk of term insurance is when the level premium comes to an end but the need continues; can the insured medically qualify for a new plan? Finding a term product with good conversion privileges is important. Term insurance pricing increases significantly if one’s health moves from the preferred health class to a standard or substandard class.
What I have discovered is how many advisors and clients do not realize that the term insurance market continues to be very competitive and a simple evaluation may produce significant savings. As I have preached in the past, life insurance is generally not managed or overseen properly.
Here are some recent case discoveries:
- A 40 year old male had a $1.5 million term policy with an increasing term premium structure. He wanted to be covered another 20 years. A new 20 year level term program saved him 30% over the 20 years. He pays more currently but over the 20 year period will save significantly over the increasing premium plan.
- A 50 year old bought a $2 million, 15 year level term plan 10 years ago. He could replace it with a new 10 year, level term plan for the same premium and the new plan gives him an extra 5 years of coverage.
- A business owner had $20 million of term that was issued with a table rating. We were successful in reducing the table rating to a standard risk saving about $10,000 per year.
- A client had $10 million of 20 year coverage that he bought 15 years ago. His need for life insurance has decreased based on a collaborative discussion with his other advisors and we reduced the coverage to $7 million for 10 years at the same premium, adding 5 more years to his program.
- A client was spending $30,000 for two whole life policies totaling $5.2 million. After an exhaustive and as he put it, “mind-numbing” analysis, we finally came to the conclusion that his true need was $20 million. He implemented a 20 year term plan…waiting to see how the tax laws and his needs unfold over the next 10 years.
Term insurance needs attention, too! It does not always save money but each case involved the critical thinking needed to make the necessary adjustments in their planning and need for life insurance.
We are here to help. Please call us at (800) 979-9393 for your case design needs.