Term Insurance in RI & MA

RhodeIsland-Insurance.Net
Serving working families in Rhode Island and Massachusetts

What is Term Insurance?

A term insurance policy is designed to provide life insurance for a specified period of time (4, 10, 15, 20, or 30  years) to protect a family during it's earning years and when the family has the largest debt.  Families also use term insurance to ensure to ensure that short-term concerns like college tuition can be paid in the event of the death of the primary income earner. Essentially, term insurance is pure insurance, and does not accrue cash values unless a return of premium rider is purchased.  As such, term is generally the least expensive form of insurance, which allows an individual to buy larger amounts of protection without breaking the bank. Sample term rates are available.

A term life insurance policy is designed to provide the policy owner with a large amount of coverage for a specific time period. If every premium is paid from the date of the policy issue until the policy term ends, the policy is designed to terminate or continue at a predetermined (usually MUCH higher) annual premium until a specified age (95 in most cases) if the policy owner so chooses, at which time the policy would end. Since this is pure insurance, there would be no cash values. Another option available with term is essentially a no cost term option. This option is often referred to as a return of premium term insurance policy.

Zero Cost Term Insurance (Return of Premium)

For those who buy 15, 20, or 30 year term policies, there is a very popular option available which (for an additional premium) will return your entire premium at the end of the term, making your term insurance policy truly a zero-cost term insurance policy if you never have to use it. This option is commonly referred to as a Return of Premium Rider.

Like cash-value whole life insurance, this policy accrues a cash value that grows over the life of your policy at a pre-determined rate while maintaining the cost savings of term, because the coverage is for a specific period of time.

The primary purpose for purchasing a zero cost term policy is to provide security for those you love, etc., but these policies have other outstanding benefits as well. They are:

• the death benefit paid to the beneficiary is free of income tax;
• the policy owner can borrow from the cash value within the policy; and,
• the money taken out as a loan is not subject to income tax.

The policy face amount and premium rates are set when the policy is issued and remain level for the term of the contract. Because the policy is a term policy, rates are much lower than permanent insurance. Because there is a guaranteed interest rate incorporated into the policy (about 6.9% tax-deferred), the policy earns cash value at a rate designed to guarantee repayment of all your premiums by the time the policy term ends.

At the end of the policy term, you can either take a cash lump-sum, an annuitized payment, or you can use the lump-sum to buy a large amount of permanent insurance (Single Premium Whole Life Insurance), guaranteeing that you will never have to make an insurance payment again for the rest of your life.

Death benefits are paid to the beneficiary free of income taxes. Life insurance is the only plan that can make this guarantee.

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This material contains only general descriptions and is not intended as any financial or tax advice. For information about specific insurance needs or situations, request a quote or contact us at (401)474-6601 or e-mail us at admin@rhodeisland-insurance.net for a free quote or home visit.