Term Life Insurance Illustration - Quality-Ins.com

TERM LIFE INSURANCE EXPLAINED

Term life insurance is for just that, a set amount of time. 10 year, 20 year. If you think about it, car insurance is term insurance. You pay for it for one year and then it is renewed. Same thing, home insurance is term insurance as well. You have a one year term on it and when that term is up you start paying for another year with new rates.

The insurance industry isn't set up to renew life insurance every year and so they calculate the rates based on 10 year or 20 year terms. This means that you get the same rate for 10 years. Term life insurance should be thought of as a tool to serve your needs for the term that you've set out. The trick is trying to figure out what is ahead for you in the next 10 to 20 years.

20 Year Term Illustration

The following simple illustration talks about the needs of a person who is now 30 years old with a new spouse, new child, new mortgage and student loans. This scenario is different than that of a 20 year old single person - no children, who is renting and has no student loans.

term life insurance Illustration of Ages, whole life insurance, universal life insurance

Financial Responsibility	DESCRIPTION OF CLIENT • Age 30 • New Spouse • New Child/Dependent • New Mortgage • Student Loan • Consumer Debt
20 year planning	The following are examples of long term financial responsibilities that you will have last for the next 20 years.
Spouse	Since marriage is a long term proposition. You want to make sure that your surviving spouse can maintain at least the same lifestyle as you currently have for the next 20 years.
New Child	A child will be with you for at least 18 years. Your child/dependent and surviving spouse need to maintain at least the same lifestyle as you currently have for the next 20 years. When the dependent turns 20, he/she will be able to provide for himself after that point and will no longer depend on you for financial support.
New Mortgage	If you have a 25 year mortgage the first 20 years are the most urgent to cover. At the beginning of the mortgage, the principal is higher and more to worry about. Career wise, at this point you're usually at the start of your career which means that you're lower on the salary scale and also you may be concerned about income stability.
Student Loans	Many people have student loans that will take 10-15 years to pay off. These loans are usually structured so that you must pay them and in some cases, cannot declare them as a debt if you claim bankruptcy. In most cases, student loans are not secured loans, but they are collected very seriously by the creditors.
Consumer Debt	When starting off with a new family situation, most people want to have nice new things. Usually they have to borrow money to pay for these things. If you have a car loan, furniture loans, stereo loans etc, the last thing you want to do is have your spouse strapped with paying off these types of debts. After all, these types of consumer items are to be enjoyed as a family and not to bring a burden on the family.
The examples above are simplified and somewhat mechanical for the sake of explaining term life insurance. We understand that everyone's situation is different.

POINTS TO REMEMBER:
Keep in mind that once your term life insurance policy is complete (ie your 20 years have lapsed), you have to start all over again with new rates. Your scenario will have changed because you're older, your financial status has changed, your debts have changed and finally your needs as a person have changed.

Keep your policy for the full term
We recommend that you always keep your insurance policy for the full term that you purchased it for as this is the most cost effective. Life insurance companies make more money when you cancel the policy midway through the term and then start up a new one. It's part of good financial stability to keep the policy for the whole term.

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