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Term life insurance
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Available payment options for term life

How you pay affects how much you pay

You have been approved for the term life insurance plan you wanted at the rate you wanted.  Now what?  Well...you're responsibility is to pay the premium in order to keep the policy in force.  This is called guaranteed renewable term life and regardless of health status, your premium payment is all that is needed to keep the plan viable.  There are various payment options available so let's take a look at how best to make sure your term life plan is safe and secured.

We get a type of call from clients and prospects unfortunately more often than we like.  Someone had a life insurance policy in force but missed the payment and it lapsed.   We want to avoid this situation at all costs for a few reasons.  The first is that we will not have protection from when this policy lapsed and a new will start.  This also assumes that you are in good health and can qualify for new term life insurance based on health.  The biggest issue is the fact that term life insurance rates are based on your age at the time of enrollment.  Just a hint...the rate goes up as you get older and this difference can be significant.  So for all these reasons, we do not want to lapse a life insurance policy.  What's are best protection?

The payment option is our first line defense.  This may be different for everyone but automatic payments have showed the best result in terms of avoiding lapsed payments.  This is pretty obvious why.  Many times with lapsed policies, a person has moved and/or the mailed payment did not reach them for whatever reason.  Keep in mind that there are different installments you can pay for life insurance and we'll talk about the important of those options later.  If you are paying a policy annually, the gap between billings can be an issue with mailed payments.  Your forwarding of mail may cancel before the next payment.  Not many payments are paid at such large time intervals so it may not register to you when you run through the various bills you need to notify of an address change.  An automatic bank withdrawal or credit card helps to avoid this.  Even when a bank account or credit card account changes, you usually get notification that a payment was attempted and failed and this cues you to address the payment.  

As we referred to in the prior paragraph, there are different installments of payment you can make for your term life policy.  Ultimately, most life insurance policies are thought of as annual payment cycles.  Most carriers offer multiple alternatives to one annual payment.  Keep in mind that life insurance is a pre-payment policy which means you are paying now for the next period of time.  The most common alternative payment cycles are bi-annually, quarterly, and monthly.  There is a cost to using one of these alternatives however.  Think of this way.  If a policy is $1200 annually (to make it easy) and you pay monthly, the carrier will essentially charge you a fee (or interest) for the unpaid amount.  For example, you pay the 1st month's premium, the carrier figures interest on the 11/12ths of the annually premium and so on.  The total of this interest is then added to the annual premium amount and then divided by 12.  You are essentially paying the interest the carrier expected to earn off the premium during the course of that year.  therefore, monthly will slightly be more expensive than quarterly which is slightly more expensive than bi-annually which is slightly more expensive than the annual payment.  There are even policies where you can pay longer periods of times for a discount and even policies where you can pay the full amount of premium expected during the entire term.  These are less common and also less popular due to the larger layout of money up front.

Ultimately, a term life policy owner needs to choose the payment option that best fits their budget and means to pay since avoiding lapse of  a term insurance policy is the primary concern. 



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 recommend speaking with a license life insurance agent.  This information is solely the opinion of etermlifeinsurancequote.com and may not be suitable for you.