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While we know that life insurance is a way to protect your dependents’ financial future, there is a common misconception that it’s expensive to buy. In fact, 8 out of 10 consumers overestimate the expense of getting a policy, according to the 2022 Insurance Barometer Study, from Life Happens and LIMRA.
Term life insurance is a straightforward type of life insurance that can be affordable: You pay fixed premiums for a set period of time—usually between 10 and 30 years—and if you pass away during that period, your beneficiaries receive the death benefit that is generally tax-free.1 And while the cost can vary significantly based on factors such as gender, age, policy type, coverage amount and length of coverage, according to Forbes Advisor’s analysis 2, a 30-year-old man could pay an average of $13 a month ($159 a year) for a 20-year $250,000 term life insurance policy, and a 30-year-old woman could pay an average of $12 a month ($142 a year) for the same term and coverage.
Keep in mind that the choice of life insurance type and the coverage amount will depend a lot on your budget and personal situation. That’s where your agent can be extremely helpful, suggesting options that make sense for you. According to the American Council of Life Insurers 3, 48% of Americans had term life insurance in 2019, and the median face value for an individual policy in 2021 was $190,000.00.
Perhaps you have a term life insurance policy that’s reached its end of term, or maybe you’ve had significant family events that have altered your needs. If you’re unsure about the amount and type of coverage that’s right for you, it’s a good idea to get a personal needs analysis.
AAA has dedicated professional life insurance specialists who will work closely with you and help you get the coverage that’s right for you and your family.
Here are some common questions about term life insurance, with answers that can help guide you as you consider protecting your family’s financial future:
The answer is yes. Term life insurance provides protection for a limited time, after which you will be older and might have health conditions—two things that may affect the cost and coverage of a policy.
Say you are a policyholder at the end of a 10-year term. You can extend the policy with no underwriting, but the premium you’ll pay could be substantially higher than what you’re currently paying for the original term and will increase each year thereafter. While that’s not ideal, there are still scenarios where it might be worth doing.
If during the original 10-year term you developed a condition that made you uninsurable, and you had gone past the original policy’s conversion period (the period of time when you are allowed to convert the policy), you could keep coverage by paying to extend the term.
If your circumstances have changed and, for instance, you have a higher mortgage payment or want to figure in the cost of a child’s education, you could increase the amount of coverage by applying for a new policy at a higher face amount, or you apply for an additional policy to complement the first one if it’s an older policy with a good premium. (Once a policy is approved, you can reduce the coverage amount, but you can’t increase it. If you want more coverage, you’ll need to apply for an additional policy.)
Because you can usually get a large amount of term insurance at a competitive price, especially if you’re young and in good health, a term life insurance policy can be a smart way to protect your family if you have a mortgage, upcoming college expenses or other forms of debt.
The face amount of the term insurance is determined by the client's needs and budgetary considerations. Permanent life insurance, on the other hand, does have a cash value feature, and the coverage will not end as long as you pay the required premium.
Term life has no cash value, but if you are 50 years old or younger, you might consider applying for AAA Life Insurance Company’s Traditional Term Life Insurance term policy with “Return of Premium” rider (ROP).
What are insurance riders, and how do they work?
Learn more
If there have been any family changes, and you want to add or delete someone or change the percentages allocated, you should update your beneficiaries. Your life insurance needs are likely to change throughout your lifetime, so it makes sense to review your coverage annually with a life insurance specialist. Check your policy to see your listed beneficiaries and update it if necessary.
It’s also prudent to name a contingent beneficiary—someone who will receive the benefits if the primary beneficiary passes away before you do. By keeping your policy up to date with your beneficiaries—and letting those people know the details of your policy—you can help make sure the payout goes where you want it to without delay or confusion.
Your term insurance may have a conversion feature, allowing you to turn your policy into permanent insurance coverage. Because life insurance rates are dependent on current age and health, having a chronic illness or a recent struggle with cancer, for example, may make getting a new policy more difficult or costly.
When you convert your term to a permanent policy, you don’t need to have a medical exam or provide evidence of insurability. Unlike a term policy, a permanent policy can cover you for as long as you continue to pay the required premium, plus you’ll have the added benefit of its cash value feature. Keep in mind that because of these added features, your permanent life insurance premiums may end up being higher than your term life premiums.
An Express Term policy through AAA can be converted to a whole life product at a standard rating. (Apply online and you can get covered quickly if you qualify.)
Check your current policy (or have your agent check it) to see if conversion is an option that’s available to you. Many policies have a conversion feature, so you may have one even if you don’t remember it. In addition, there is usually a set period of time during which you can convert your policy, and there’s also a maximum age for converting a policy, usually 65.
Protect loved ones
Getting the right type and amount of life insurance is an important step in protecting your family’s financial future. AAA agents are available to discuss what’s covered for you and your family.
This information is being provided for general informational purposes only. The Auto Club Group does not assume any liability in connection with providing this information.
Life insurance underwritten and annuities offered by AAA Life Insurance Company, Livonia, Michigan. AAA Life Insurance Company is licensed in all states except NY. CA Certificate of Authority #07861. Products and their features may not be available in all states.
AAA Life and its agents do not provide legal, tax or financial advice. Please consult your professional advisor prior to the purchase of any policy or contract.
This is a summary of product provisions and does not contain all of the benefits and exclusions. For complete terms of the insurance coverage or annuity, please contact your agent or refer to the policy/contract.
Annuities - LA
Annuities are not short-term products. During the surrender charge period, withdrawals exceeding 10% will be subject to a surrender charge that may be higher than fees associated with other types of financial products and may reduce principal. Withdrawals prior to 59½ may be subject to IRS penalties, separate from the annuity’s schedule of surrender charges.
EliteGuarantee Deferred Annuity - LAEG Contract Form Series: ICC11-4101/DA-4101 (In OR: ICC11-4101)
Platinum Bonus Annuity - LAPB Contract Form Series: ICC11-4111/DA-4111 (In OR: ICC11-4111)
Guaranteed Income Annuity - LAGI Contract Form Series: ICC14-4120/SPIA-4120 (In OR: ICC14-4120)
The payout amount you will receive is based on your individual circumstances, the options you select at the time of application and your initial premium payment.
Term Life Insurance - LT
Premiums are guaranteed. They are level for the term period and increase annually thereafter. Any sample premiums are examples only and may vary based on your personal health history and underwriting guidelines. The answers provided to the health questions are used to determine eligibility for coverage. Not all applicants will qualify. Product and its features may not be available in all states. Coverage ends at age 95.
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (8% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
ExpressTerm - LTE Policy Form Series: ICC19-1601/1601 (In OR: 1CC19-1601)
Traditional Term - LTT Policy Form Series: ICC19-1801/1801 (In OR: ICC19-1801)
Group Direct Term Policy Form Series: GT8200
Individual Direct Term Policy Form Series: ICC16-1501
Universal Life Insurance – LULG
Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
Lifetime Universal Life Insurance - LUL Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
Policy Form Series: ICC19-4701/4701 (In OR: ICC19-4701)
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (7% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Accumulator Universal Life Insurance - LULA Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
Policy Form Series: ICC19-3701/3701 (In OR: ICC19-3701)
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (5% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Whole Life Insurance
Whole Life Insurance (for coverage amounts of $30,000 or more) - LWL Policy Form Series: ICC18-5601/5601 (In OR: ICC18-5601)
Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (8% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Rapid Issue Whole Life Insurance (for coverage amounts of $25,000 or less) - LRIWL Policy Form Series ICC20-7001/7001 (In OR: ICC20-7001)
Responses to the application will be used to determine approval for coverage. Not all applicants will qualify.
This Whole Life policy is referred to as graded benefit whole life insurance. If you suffer a non-accidental death within the first two years of coverage, your beneficiaries will get 100% of the base premiums you paid, plus 35%. After two years, the total amount of your coverage is paid for death due to any cause.
After the first two years of coverage, if insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (8% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Guaranteed Issue Whole Life Insurance - LGIWL Policy Form Series: ICC16-6301/GWL6301 (In OR: ICC16-6301)
The maximum amount of Guaranteed Issue Whole Life insurance coverage per insured is $25,000.00. Subject to age requirements and policy limit restrictions.
This Guaranteed Issue Whole Life policy is referred to as graded benefit whole life insurance. If you suffer a non-accidental death within the first two years of coverage, your beneficiaries will get 100% of the level monthly premiums you paid, plus 30%. After two years, the total amount of your coverage is paid for death due to any cause.
If you are a California resident 65 years of age or older, we are required to advise you of the following. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of this product may have tax consequences, early withdrawal penalties, or other costs or penalties as a result of the sale or liquidation. You may wish to consult independent legal or financial advice before selling or liquidating any assets and prior to the purchase of any life or annuity products being solicited, offered for sale, or sold
ALAN-29546-624-XX
