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INSURANCE EXPERT WITNESS - Areas of Expertise

Term Life Insurance
Term life insurance was the first kind of life insurance developed and it is still in existence today. It is a simple product, designed to be in force for a certain period or “term” of years. Today you can buy term insurance for either a specific number of years or until a certain date, such as age 65 or 70. If you pay your premium and death occurs while the policy is in force, your beneficiary receives the death benefit.

Term insurance is used to cover specific time periods such as while young children are being supported or during the time of heavy debt. Many commercial lenders require term insurance that is payable to them for larger loans.

The most popular type of term insurance is yearly renewable term however products are offered in many different increments of years such as 5 year term, 10 year term and up to 30 and 40 year term. Some policies are guaranteed renewable for a certain number of years while others require proof of health to renew beyond a certain period of time. Most products are convertible to a permanent form of insurance during some or all of the term period. These two features, renewability and convertibility, are very important features to be researched and discussed before purchase.

The advantage of term insurance is that it is relatively inexpensive when compared to other forms of life insurance. The disadvantage of term insurance is that the chance of it being in force when the insured dies is very limited. Only 1% of all term insurance ever result in a claim. When the insureds’ greatest chance of dying occurs, the insurance is cost prohibitive.

In the early 1900s there was a great deal of criticism of the life insurance industry because of the fact so little life insurance was resulting in a claim being paid to widows and orphans. There were also many problems with insureds having paid premiums for years and having nothing to show for their outlay of money. This problem coupled with the fact that the cost was so high to maintain the coverage in later years caused the life insurance industry to come under a major legislative and consumer attack.

In response to the criticism of their product, the industry designed a new series of products that were designed to both keep policies in force until death and protect themselves from the financial loss of every insured actually dying and resulting in a claim. The result of this shift in design was a policy to cover an individual for his “whole life”.