About the Author:
Randy Taylor has Advised consumers on both term life insurance and permanent life insurance for over 30 years and has also advised stock brokers, financial planners, and insurance agents on which companies & products to select for different client situations for an additional 10 years!
Published since 1998; quoted in Forbes.
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Copyright 1/31/2014, All rights reserved
California residents only: Call for estimates at 916-601-5270
When Does Temporary Term Life Insurance Make Sense?
The answer is simple; when you have a temporary need for life insurance; 30 years or less. One of the newer,more cost effective types of term life insurance are absolutely the best solution. Let’s look at some examples of which types of insurance are best for temporary insurance needs:
Newlyweds or new couples that are on a limited budget.
If a couple has shared debts that would have to be paid off for the benefit of the survivor; then a simple
program with a rate guarantee as short as 10 years might make sense.. The strategy is to have enough life
insurance to replace the lost income of the main bread winner,or to insure both parties..The solution is to use the least expensive plan at the time that provides adequate coverage until they could afford a more permanent solution.
Most temporary term plans also provide an option to trade the policy to a permanent one later; without having to re-qualify for the same good health rating. That means no new exam is neeeded for a permanent plan in the future.
Business owners in a new business or partnership
If a business is new and short on cash flow, a term policy designed to be kept for only 10 or 20 years works very well. The money that comes income tax free to the beneficiary can be used to pay off a creditor, to buy any remaining business interest from a partner’s spouse; or can be used as collateral for an SBA loan in many cases. An experienced insurance broker and or attorney can advise you on how to structure the beneficiary wording or buy-sell contract to make for the best use of the money.
Mortgage Life Insurance for Home Loans
There is a new concept available that I like for those seeking coverage equal to a home loan debt where the loan obligation is for 30 years. If a client is 50 years old or younger; many companies offer a plan that has a low premium guaranteed to stay level for 30 years. All premiums are refunded as per contract conditions if the owner wants to cancel the insurance after 30 years and ask for a “return of all premiums paid”.
If the buyer cannot afford a 30 year return of premium plan a straight 30,20,15, or 10 year plan with no premium return options are available at a lower initial premium.
No one insurance company or insurance plan is ideal for everyone; but for temporary needs it is best to get temporary insurance. Also seek rate estimates from an experienced broker than can recommend a solution for you based on both your health, ability to qualify, and your insurance needs. Often “renting” insurance rather than owning a permanent plan is better.
The above article is meant for entertainment purposes only; and you should consult with your insurance broker and other financial advisors before purchasing any financial or insurance products.
Randy Taylor, Author
Copyright 1/31/2014 All rights reserved
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Life insurance and I.R.A. Account Specialist
Serving clients and brokers since 1983