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Important Questions to Ask About Term Life Insurance Policies & Proposals


Amount: Is the amount of life insurance correct for the client’s needs?

Basic Assumptions: Are the illustrated assumptions accurate and reasonable? (i.e. age, gender, health underwriting)

Ownership: Is the policy ownership structured correctly within your client’s estate, business or financial plan?

Beneficiaries: What are the appropriate primary and contingent beneficiary designations? Who is responsible to ensure that policies have appropriate designations? (i.e. attorney, CPA, insurance representative, client)

Guaranteed Premium: Does the policy have a guaranteed level premium for a long enough period (10, 15, 20 or 30 years) to minimize your client’s total term insurance premium cost for the projected duration of the term insurance need?

Cost: What is the insurability offer and actual premium after underwriting is completed? What does the term life insurance really cost? Please keep in mind that life insurance companies evaluate “smokers” differently, and have  different levels of “preferred” premiums as well as “substandard” premiums.

Conversion Guarantee: Does the term insurance policy guarantee the right to convert to cash value life insurance at the term insurance underwriting classification without further evidence of insurability? Does this conversion guarantee extend for the entire premium guarantee period or to a maximum possible age for older insureds, usually age 65, 70 or 75?

Term conversion is your client’s “Plan B” if the insured’s insurability worsens, or the need for the life insurance lengthens, and the policyowner wants to cost effectively continue the death benefit beyond the level term premium guarantee period.

Insurance Company: What are the asset size and financial ratings of the life insurance company? Also, does the term life insurance company have sufficient asset size, adequate financial ratings, and good historical performance to be likely to offer cost effective cash value life insurance if the client’s life insurance needs or health change in the future and the conversion guarantee is exercised? Has the company been downgraded by the rating agencies recently?