Getting quotes on term life insurance and return of premium (rop) term life insurance is easier than ever. It is important to make sure that you are getting the quote on the proper type of policy that you are looking for. Through our quote engine at www.paramountlifeinsurance.com you can fill in your information and get a a quote within a matter of one or two minutes. For a (rop) quote you can call us at 1-800-554-9142 or to find the most suitable policy we can offer a free consultation.
There are several things that go into selecting a policy and that includes the length of the term, whether you want money back at the end of the term, what company do you want to work with, and what are the conversion options. If you will keep a 20 year term for only 14 years, then you paid too much and should have selected a 15 year term. Are you better off getting (rop) or should you do a guaranteed universal life as it will be permanent or do you want to have a whole life plan? These are the different options and it can seem confusing and that is why we feel it makes sense to get a consultation with one of our licensed agents. We can help you navigate through the quote process and also be the best estimators of your underwriting rating. For example, if you receive a quote that is overly optimistic or with a company that underwrites poorly for certain circumstances you could be in for a negative surprise when you apply.
If you are a smoker/tobacco user you will automatically pay a substantially higher life premium than a non-smoker/non-tobacco user would. The good news is that you can get a non-smoker or even preferred rating if you stop using tobacco for at least 12 months. Most companies will allow you to qualify for this rating at that point.
Obviously, smoking opens the door for all sorts of health risks and the insurance company is very focused on that. Not only smoking, but any form of tobacco use like a pipe or smokeless. It also negatively effects return of premium (ROP) policies as much more premium must be paid. ROP’s tend to be a better fit for clients that are younger and non-tobacco. If you don’t have insurance, I would certainly not wait until you have reached 12 months with no use. This is a risky proposition as you could be uninsurable at that point. I recommend to my clients that are quitting to get the protection in place and then we will re-underwrite once they hit that point.
One company that has a favorable treatment of smokers is John Hancock. They have a Universal life product that you can qualify for as a non-tobacco user in the first 12 months. The stipulation is that you must submit to a medical at the end of two years, to prove that you are still tobacco free. You can visit Hancock online at www.johnhancock.com to read more about this policy type.
We speak to a lot of clients who are looking for mortgage protection life insurance. Basically, this is life insurance that would provide enough money to the beneficiary to pay of the deceased’s mortgage. Many of the programs out there will offer life insurance with a decreasing benefit to go along with the decreasing mortgage amount. We recommend staying away from these products as the cost doesn’t go down, but your benefit does. To cover this type of single issue you have many different options with life insurance products.
Example 1: You just bought a house with $250,000 mortgage and the term is 30 years. You can take out a straight 30 year level term that will run out when you presumably payoff the mortgage in 30 years. Obviously, few people know where they will be in 30 years, let alone in the same house. Any way you slice it, you will at least have protection for your heirs of $250,000 for a full 30 years. In year 31, the term premium will skyrocket and most people will drop it.
Example 2: Return of Premium (ROP) is a very popular product these days for mortgage protection. Just take the same $250,000 mortgage with a 30 year term, and buy a 30 year ROP. This product will return all of the premium to the policyholder if they are still alive at the end of the term. Usually, these rates are higher than an average term policy, because of the premium return aspect.
Example 3: Some clients will use a permanent policy such as a Universal Life and fund it guaranteed to age 100. This will last the whole term and provide them with a death benefit that should last their whole life time. This is more expensive initially than the ROP and the straight 30 year term, but looks very appealing in year 31 when the policy premium is still the same.
What is the right term length for your individual needs. There are several different length policies to choose from including 5, 10, 15, 20 and 30 year fixed. How do you know what length you should have?
The main questions to ask yourself is how long do I think I will have a life insurance need? Can I be 100% sure that I will need life insurance for that period of time or will I possibly need it longer? Will I ever convert part of the policy to permanent insurance, and when should I do that?
Those are all important questions that I like to ask my clients. Usually, you will have a need for life insurance as long as you are working to protect your spouse and children. Some may argue, that once the children reach maturity there will be a smaller need for insurance. That may be the case, if your savings can supplement the life insurance to protect your income for your spouse. It does make sense especially when the children are young to max out the amount that you buy.
The time period is important to figure out as well. For example, if you buy a 20 year term your insurance needs could easily change in that period of time. It is pretty hard to know anything for sure. I would suggest that if you have kids are young to buy at least 20 year term to cover them through college. If they are older, you may be able to get a shorter term to get them through college. Some people like to buy a policy that is 30 years that will cover the full length of all of their liabilities (mortgage, college, etc.). Thirty year return of premium (ROP) policy’s have become very popular for this purpose.
Many of our clients do a combination of term and permanent to take care of large short term needs and cover their long term needs as well. For example, a client with a newborn who needs to buy 2 million dollars of face amount, might buy $200,o00 in whole life insurance and 1.8 million of 20 year term. He can only afford $200,000 at this point of whole life, but now has a long term and a short term strategy that will provide some protection as long as he lives. The sooner you buy permanent insurance the better as you lock in the mortality rate at that age. When the term premium goes up in 20 years, the permanent premium remains level.
Money back term life insurance is concept that has been created by the insurance company’s to refund the customer the term premiums at the end of the term. This has been a very hot product (ROP-Return of Premium). In essence, a customer is buying a term policy that costs about 30-50% more than your average regular term policy. The benefit for paying more is that the premium amount will be returned in full at the end of the term period.
Is this a good deal?
For example, a 1 million dollar, 30 year ROP term policy costs “Bob” $1000 a year in premium. At the end of the term if “Bob” has paid the full time and is still alive he will get a check back from ABC insurance company for $30,000. If he cancels early, typically he would get back only a portion of his premium: usually nothing for the first six years, 9 percent after 10 years and 35 percent after 20 years. At first look, it looks like it makes a lot of sense. If Bob, lives through the 30 years he gets back all the money he ever paid to the insurance company. On the other hand, if he paid a regular term policy for 30 years and was still alive he and his family would get nothing.
The insurance company knows that few people will ever pay for a policy for the full term and that they are going to win in most cases. On top of that, very rarely do they ever pay out a death claim. Bob, might be better off buying the less expensive term (for say $600 a year) and investing the difference ($400) in to an interest bearing account. This only would work if Bob made sure he remembered to truly save this amount every month and put it aside. Bob, may want to compare Universal life guaranteed to 100 as another option. It would cost more than the ROP and regular term, but it would guarantee a death benefit for his family. The chances he lives past 65 are very high.
ROP can be a great option to look at and it is a very popular life insurance product right now.