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Long Term Life Insurance Protects Long-Term Interests

By Mike Heuer

When buying life insurance, many insurance agents and brokers like to get people to buy whole life products that provide an average 2.5 percent return over the life of the contract, according to the National Association of Insurance Commissioners. But what the insurance producers often don’t mention is that long term life insurance policies can provide a great deal of protection for much less money – particularly the younger the named insured is when buying the policy.

A term life plan lasts for a set number of years, usually 10 years to 30 years, and then becomes void if the person whose life is insured outlives the term for which coverage is provided. And that happens at least 90 percent of the time and as often as 99 percent of the time, according to several studies. That means a term life insurance plan is a very good risk for insurers who sell them in volume and spread out any risk among the many policies sold.

Because a term life plan provides protection for a period of time and then ends, many insurance experts consider it to be the purest form of life insurance sold. There is a death benefit available, but only for as long as the policy is in force.

By contrast, whole life insurance plans require the policyholder to make enough monthly premium payments to provide the death benefit that ultimately is paid in most cases. That means it costs more than 10 times as much for a whole life insurance plan than it does for a long term life insurance policy for the same death benefit. It also is a prime reason why many insurance experts consider term life to be the purest form of life insurance sold.

Contributing to the cost factor of whole life plans is the fact they not only result in cash value growing based on the monthly premiums paid but also because nearly every cent paid in premiums during the first three years the policies are in force is used to pay commissions, fees and other costs. Whole life plans typically do not accrue cash value until during their fourth year.

Term life is much more affordable and easier to obtain than whole life insurance. A $250,000 death benefit can be had for as little as $15 per month with a term life plan while a whole life policy might charge as much as $200 or more. And term life can be purchased with no medical exam performed by an insurer-approved physician. Instead, consumers need to only provide basic health information, whether or not they use tobacco products or engage in risky hobbies, like skydiving, and give their dates of birth. Insurers then compare the information to mortality tables to determine the odds of the named insured dying while the term life plan is in force.

When term life is so much easier to buy and more affordable than whole life alternatives, it is possible to use the Internet and sites like this one to find the best deals possible.