Did you know that research shows that people love term insurance not just because it’s relatively inexpensive, but because it’s easy to understand? People ‘get it’ that if death occurs during the time frame of the contract then the contract pays out. And, like their car and other insurances they usually have the option to renew the contract at certain points in time. Simple and no feeling of being bamboozled with technical, incomprehensible insurance mumbo jumbo. Fair enough, but given the fact the people can buy term insurance on line means that your value added is in explaining in simple, understandable “kitchen table talk” language what they already own and what their buying options are, along with the pros and cons of each as they relate to their specific needs. For example, do they need a safety net that allows them to keep their insurance even if they miss a payment?
Term Insurance is a wonderful product that allows people to fill their insurance protection needs, relatively inexpensively at the outset. However one of the downsides often over looked when discussing Term Insurance is that any payment missed for a period of longer than 30 days (the grace period) means the insurance protection is gone.
No big deal, right? After all the Term Insurance contract can be reinstated or “brought back to life”. True, if the life insured can i) prove that they are still a healthy/good risk for the insurance company to take back (insurable) and ii) pay the outstanding balance owing (with interest, if any has been charged). Assuming those two conditions can be met the contract is valid again. However, the 2 year suicide and incontestability clauses are also back in place. And life’s circumstances (other than a bank error) that cause people to miss or stop paying for their Term Life Insurance are often the same as those that would lead people to commit suicide e.g. mental illness/depression, financial difficulties caused by illness or job loss, family break downs and all other stresses.
Life Insurance contracts that have a cash accumulation component (guaranteed cash value or funds value) provide access to cash to pay for the insurance contract when the regular payment mode cannot. The availability of cash in a life insurance contract can act as “a safety net” for the life insurance which has been put in place to be exactly that — a financial safety net! Permanent life insurance and Universal Life contracts are the options available for term conversions.