After-Tax Term or Pretax Term Life Insurance

Two types of term coverage with accompanying charges for mortality and expenses: non-guaranteed term and yearly renewable and convertible term.

You may purchase retail term life insurance by using sufficient after-tax dollars to pay yearly mortality and expense charges, or you may pay for life insurance with the pretax earnings on investment capital you choose to deposit within an insurance contract. Two types of term coverage with accompanying charges for mortality and expenses: non-guaranteed term and yearly renewable and convertible term. Table below illustrates the cost of each for a $250,000 policy for a nonsmoking male.

The premiums for the limited 3-year term insurance in the table are for non-guaranteed term, insurance that cannot be renewed beyond the third year and cannot be converted by the policy owner.

The insurance company can charge low rates because it retains control. It examines you prior to issuing the insurance, and if, based on this examination, the underwriters determine that you have at least a 3-year life expectancy, the insurance company issues the policy, collects its 3 years of premium, terminates the contract at the end of the stated period, and eliminates the risk.

No wonder it is cheap! Because there is very little risk, the company can charge very little for it. If it serves your objectives and those objectives don't change, the policy may be a perfect solution. The risk you take is that your personal objectives might change or your health might deteriorate. When the policy expires, you may have no way of obtaining a replacement.

Age	Limited 1-year Term Insurance	Yearly Renewable and Convertible Term
30	0.50	0.42
35	0.50	0.43
36	0.52	0.44
37	0.53	0.47
38	0.56	0.50
39	0.58	0.53
40	0.62	0.57
40	0.62	0.57