What should I look for in a Term Life Insurance Illustration
January 15th, 2009Current without Re-Entry Premiums - these premiums do not require re-qualification (providing evidence of insurability) after the policy is issued. Future premium rates shown, beyond the guaranteed level period, are not guaranteed and may be changed by the carrier, without notice subject to the maximum guaranteed premiums. Guaranteed and non-guaranteed rates are shown on the carrier’s compliance illustration, along with additional important information.
Dividends - Dividends illustrated are based upon the current dividend scale and can be changed by the company.
Guaranteed Premiums - guaranteed premiums are the carrier’s published, guaranteed premiums and are those shown under the heading “Guaranteed” (or “Maximum”) premium rates. At the end of the level period, the “Guaranteed” rates shown are the highest premiums that the carrier will charge the policyholder. Actual premiums will be the then current premiums, which may be less than but never more than the guaranteed rates shown.
Insurance Age - Depending on whether a carrier uses Insurance Age (your actual age plus six months and one day), Age Nearest Birthday (the typical methods used by almost all carriers), actual fie, or age last birthday will have an effect on the desired effective date of your policy. The company’s pricing reflects its age rating method. This can be offset by backdating a policy to “save insurance age”; i.e., having a policy backdated to just prior to an insurance age change, which would mean a lower premium for the life of the policy. I have never found a reasonable answer as to why insurance carriers all don’t simplify this by going with actual age and date of birth.
Modal Factor (How often you pay the premium) - this is a factor applied to the annual premium to derive the premium due for Semi-Annual, Quarterly and Monthly Bank Draft Payments. The Modal factor for semi-annual premiums ranges from 51% to 53%, which means that you can end up paying an extra 2% to 6% if you don’t pay the premium annually. The modal factor for quarterly premium ranges from 26 percent to 30 percent at times.