Learn About 20 Year Term
The development of the 20 year life insurance policy into one of the most sought after, the most loved and most popular life insurance policies was by no means an accident.
A very small life insurance company felt that this was one of the best policies created and set out to prove it…
Then began a sales and recruiting campaign that was almost cult like. Other life insurance companies jumped on the band wagon
20 Year Life Insurance Takeover
The big life insurance companies accustomed to selling whole life insurance did not know what hit them. Many had to update their portfolios or at least their marketing practices.
Then came the debates as to which companies had the cheapest 20 year life insurance policy. The original life insurance company kept on selling and has become one of the largest companies in the industry…
The interesting thing is that this company that showed such a dislike for cash value life insurance soon was selling mutual funds in order that their vast policy owner base would have an intelligent vehicle through which they could accumulate some money.
Because of competition the premium of the 20 year life insurance policy kept getting cheaper. The consumer gained tremendously as a result. Here is how this policy works.
The Death Benefit
The 20 year term life insurance policy is sometimes referred to as a 20 year term policy or a 20 year term life insurance policy.
This policy has a guaranteed level death benefit that remains level for the entire 20 year duration that can be paid out either in a lump sum or in the form of a monthly income when the insured dies.
If the policy is a small policy it may be wise to take these proceeds in one lump sum. For larger policies that decision is an arbitrary one.
Should it be your decision to have proceeds of your 20 year life insurance policy paid in the form of an income there are many options. Here are some descriptions of how it may work for you.
- The Fixed Amount income Option
You could choose to have a specified amount of income paid out each month, for example, until the proceeds of the policy are exhausted.
In the long run because the unpaid balance earns interest, if you added up the amount paid out, it would be considerably more than the face amount of the policy itself at death. - The Fixed Period Income Option
With this option you would tell the life insurance company to distribute the proceeds of the policy to your beneficiary over, for example, a period of 5 years.
With this option the total would also be more than had the death benefit been paid in one lump sum. - The Life Income Options
The death benefit of the 20 year life insurance can also be paid in the form of a life income. The life income can be paid out in several different ways.
The largest amount of life income you could have paid is a life income with no guaranteed period. You could also choose a life income with a 20 year guaranteed pay out period, a 15 year guaranteed payment period, a 10 year guaranteed period or a 5 year guaranteed period.
The shorter the period of guarantee the higher the monthly income. - The Interest Income Option
If you wanted the death benefit to be paid at a specific point in time you could tell the life insurance company to hold on to the principal and pay only the interest to your beneficiary at preselected intervals.
The company would pay the lump sum at the selected time. Let us suppose that your 20 year life insurance policy was earmarked to pay for your child’s college education if you died before s/he is ready to enter college.
The company would hold the principal until college time and pay it out then.
The 20 year policy is often used for family situations. Business people also use it to fund buy-sell agreements in the event of the death of a partner or shareholder.
Sometimes a business may have an employee that is so good at their job that the loss of this key person could be quite costly. A smart business person would buy a policy on this employee’s life.
Upon death the proceeds of the 20 year life insurance policy would be paid to the business.
- Waiver Of Premium Rider
You have the option of adding the waiver of premium rider to your policy.
If you should become disabled, anytime after six months of disability, the life insurance company will step in and pay your premiums for you for as long as you are disabled even if it is for entire life of the policy.
You won’t owe them anything for paying the premiums for you. - Accidental Death Benefit Rider
If you, for example, should die in an automobile accident the life insurance company will pay two times the amount of death benefit to your beneficiary.
If your 20 year life insurance policy was for $1,000,000 the life insurance company would pay $2,000,000 if you died in an accident.
There is an extra premium charge for these riders.
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