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I clearly recall the days when term life insurance was something you just didn’t buy. The argument by prospective clients went something like this. “Why should I put out money to buy this policy which pays only if I die? I am young now and I am not ready to die just yet.” The life insurance companies didn’t mind very much. People would buy whole life insurance or modified whole life policies simply because they would get back some money if they didn’t die within 10 or 20 years. These premiums are more costly than term policies. The buying public is more educated now and term insurance has found it’s place.
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People have discovered many great ways of investing money so they no longer consider whole life insurance as a savings vehicle…it was never a great one anyway. More people are investing in stocks, mutual funds and money market investments than they ever had. They have 401K plans on their jobs in many cases. Term life policies are much improved. They can be kept for longer periods of time. Some require increases in premiums whereas others stay level for the duration. The end result is that term insurance policies seem to sell as much as permanent insurance or probably more.
People can buy 20, 25, or 30 year term policies for family protection. These policies are also used to fulfill business life insurance needs. The shorter term policies like the 5 year or 10 year term policies are used for shorter term needs or are bought because of the low premium with the intent of converting to permanent life insurance sometime in the future.
Many term life insurance policies are purchased for mortgage protection. You know, people just want to know that their mortgage is paid off if they should die while they owe money on their house. They want their families to be secure.
Life insurance agents used to be quite afraid to sell term policies and not for the reasons that most people think. They were afraid of having the policy go into a state of lapse. Owners of term policies cannot afford to miss a premium like they can with whole life. Whole life has a cash value and accumulate dividends which can be used to reduce premiums. Dividends are not guaranteed though. The premiums for term policies are much lower than they used to be and as a result people are keeping their policies much longer than they used to.
Because of the low premiums people tend to buy large volumes of this type of life insurance so more families are secure. They can carry on after the death of the breadwinner. More small businesses are secure because the partners or stockholders can afford the amount of life insurance required by their buy sell agreements. They also can buy sufficient key employee insurance which provides sufficient funds to continue on after the death of a key man or woman.
Term life insurance has surely come a long way. It should be interesting to see what the policies will be like in the future.
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