TERM LIFE FAQ

These are our most frequently asked questions about term life insurance. (term life faqs)

1. What is life insurance?

Life insurance policies come in a wide variety, but they all share this feature: For consideration of a premium someone will receive money when someone else dies. (That someone may be a trust or a corporation as well as one or more individuals.

2. What types of life insurance are there?

The two basic types of life insurance are Ordinary Life and Term Life.

3. What is Ordinary Life Insurance?

Ordinary Life Insurance is based on a mortality assessment to age 100. Premiums are higher in the early years to fund mortality in the later years. Consequently, it builds cash value which you will be able to borrow against or take at surrender. This makes it an asset. You may keep your life insurance to age 100 (or later, depending on the contract) as long as internal values support the policy. The following are types of Ordinary Life: Whole life, Universal Life, Variable Life, etc. There are many other variations.

4. What is Term Life Insurance?

Term Life Insurance is purchased for a specific period, after which it terminates. Premiums are cheaper because mortality risk is limited. Term Life is good for bulking up your life insurance while children are young. It also is used to satisfy conditions of loans or partnership agreements, or for any need that has a fixed duration. Term insurance comes in variations such as Annual Renewable Term (ART), Decreasing Term and Flat Term.

5. What is Decreasing Life Term?

Decreasing Life Term or Mortgage Decreasing Life Term is Term Insurance that is tied to the decreasing value of your mortgage. The premium remains flat while the benefit decreases. It usually is not a good value these days. Flat Term is generally cheaper and the benefit does not decrease.

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6. What is Annual Renewable Term (ART) or Yearly Renewable Term (YRT)? More Term Life FAQ's

ART and YRT refer to a Term Insurance policy wherein the premium increases each year according to your attained age.

7. What is Flat Term?

Flat Term refers to a recent innovation in Term Life wherein the death benefit and the premium are guaranteed to remain the same for a period of time. Guarantees lasting the duration of the life of the policy are strongly advised. Be sure to ask before purchasing.

8. What is a collateral assignment?

Banks, lending institutions, the Small Business Administration and other interested parties sometimes ask for a collateral assignment on your life insurance policy. The collateral assignment gives the interested party an interest in your policy to the extent of your remaining obligation. For example, if a bank loans you money for a business it will require you to have life insurance for as much as or more than the amount of the loan. The bank will have an assignment (become first in line) in the case of your death for the amount still owing on your loan, but no more. The balance of your policy death benefit will be paid to your beneficiaries per your instructions.

9. What is a beneficiary?

A beneficiary is a person or entity (corporation or trust) designated by the owner of a life insurance policy to receive death benefits at the death of the insured. Beneficiaries can be primary or contingent. Primary beneficiaries are first in line for proceeds. There may be more than one primary beneficiary and the percentage he or she will receive is determined by the owner of the policy. Percentages must total 100.

10. What is a contingent beneficiary?

A contingent beneficiary is a party designated to receive funds should the primary beneficiary pre-decease them. For example, it is common for a man to name his wife as primary beneficiary. It is appropriate to name their children as contingent beneficiaries should husband and wife die together in an accident.

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