The history of life insurance in the United States of America dates back to 1735 when the first life insurance company was formed. Over the years this sector grew and grew and today it is a common feature in the day-to-day life of most Americans. With progressive development came diversification and now there is an amazing range of life insurance policy types to choose from.
In America there are basically two types of life insurance policy – the whole of life policy and the term life insurance. Whole of life policy is a rather expensive and not so popular type of policy, while the reverse is true for term life insurance policies. It is the latter that we shall deal with in detail here.
The basic concept of term life insurance is that it covers a person for an agreed fixed period. According to the type of policy, there is a factor called the “rate” of the policy which defines the premiums to be paid and the level of death benefit payable. There are several ways in which the rate can be affected.
There are several factors which contribute to difference in rates of term life insurance policies. The rates will vary depending on the duration of the term. The age of the person also has a lot to do with how the rates vary. Then there are other factors such as smoker status, occupation, general health, marital status and so on.
The medical history of a person is a major factor in deciding the rate. Obviously, a person with a record of consistently good health will qualify for a good rate. The process wherein the medical records and personal declarations of the applicant are closely scrutinized is known as underwriting. Sometimes a person has some genetically transmitted medical conditions like diabetes or chronic heart disease. Such people would be subject to heavy scrutiny in underwriting and attract higher premiums. In some extreme cases they could be excluded from taking an insurance policy altogether.
Once a person has decided to buy a term life insurance policy, the rates have to be obtained and compared for the best deal. This can be done by many ways. One can make telephone calls to the insurance offices and ask them for quotes. A visit to a few of the major insurance companies may draw a lot of information. A discussion with a life insurance agent can result in several quotes. But all this information tends to be rather confusing and troublesome if it is not acquired in a systematic manner.
The best way of collecting the required information regarding the latest rates in the term life insurance sector in the U.S. is from the internet. By spending a minimal time on the internet, one can obtain quotes from several major insurance companies. Once a reasonable number of quotes have been procured then a choice must be made depending on which company offers the best rates. However, one must keep in mind that the lowest rate may not necessarily mean the best rate. Several other factors are involved where an expert opinion is required. At this stage it would be advisable to bring in a financial advisor or insurance expert to help take the right decision.
One last thing that should be kept in mind is that the insurance rates vary from day to day. A record should be maintained showing the fluctuation in the term insurance rates. This will be very useful in the long run to monitor the potential returns from the policy throughout the term. Sometimes when rates are down, one could move the money into a safe cash fund for some time. Conversely if the rates rise, then the money could be put into some higher risk high return investment fund. This kind of movement is not always allowed and would largely depend on the provisions given in the policy.
So here we see that the rates of term life insurance policies in the U.S. are volatile, but with the right kind of handling, investing in such policies can not only ensure the financial security of the insured persons and their loved ones but also can be used as an effective investment vehicle.