in the previous segment we introduced you to term life insurance and now I want to cover a couple of features about term life insurance specifically the renewability and convertibility options available under term insurance uh you may recall that we discuss term insurances for a specific term and at the end of that term your insurance is actually terminated however if your plan has a renewable feature that means at the end of your term term you can in fact renew it for another term and so in term plans can be renewable or nonrenewable most of the ones sold today are renewable plans and so with a renewable plan at the end of the term your policy will be renewed your uh for another term and in fact as the insured when it renews they do not need to provide any additional evidence of insurability now at the time of renewal obviously they're going to be older let's say for example we had a 10-year Term Policy that someone purchased at the age 30 at age 40 uh the term is over but the person would like to renew it for another 10 years and if they renew it for another 10 years simply because they are now 10 years older the mortality cost is going to be higher because their risk of dying is higher and so when you renew the policy for another 10 years in my example you're going to have to pay a higher premium Now the insurance companies in a renewable term plan will already let you know up front from day one what the cost is going to be to renew this policy uh at the end of the term so your renewal premiums are will increase as you get older but they are guaranteed and they are printed in the contract so you know exactly how much it's going to cost you now you do not have to renew the policy but if you do you get your insurance coverage for another term and as I said earlier you do not have to provide any medical evidence of insurability at that point in time so that's a pretty good feature now some companies will allow you at the end of the term to in fact provide them with medical uh evidence of insurability and if you're still healthy in fact they will quote you a new premium which in fact will be lower than the guaranteed premium that they offered you in the original policy and the reason for that is obviously they're now seeing your medical information at the point of renewal if they don't see that medical information at the point of renewal they don't know whether you're healthy or not any longer and that's why the guaranteed renewal premium that you have will likely be higher than if you provided them with medical evidence of insurability at the time of renewal to and so that type of capability or policy is called a re-entry term they allow you to reenter uh by providing medical evidence and uh if you're healthy they'll quote you a new premium which is usually lower than the guaranteed renewal premium so let's talk now about the convertibility option as I said earlier term insurance is is for a specific term and we also learn that in fact most term insurance plans will expire usually between age 75 and 80 so if you need coverage beyond that uh you're not going to have it uh convertibility the convertibility option is a feature that term insurance plans have that allow you at any time to convert your term plan to a permanent insurance plan with the same insurer and at the time you convert again you can do that without providing any additional medical proof of insance insurability and so when we convert our plan we in fact now have a permanent plan our premium at that point in time because now we have a permanent plan our premium is going to likely go up because a we're older but also we're now buying an insurance policy that we are going to keep for the rest of our life it's likely that people that convert uh their term insurance plan to a permanent plan because they don't have to provide medical evidence they tend to be in more of a deteriorated Health situation because if they were healthy they would in fact provide medical evidence and get a new policy at that point in time but it's likely that when they convert many people may not be able to get insurance uh because maybe they're older not as healthy uh they may be uninsurable or they may have some sort of uh medical issue that maybe the insurance is a cost them bit more so the convertibility feature on term insurance plans is quite a valuable feature uh if you decide you need coverage Beyond age 70 or 75 now one of the things you have to uh uh think about is how much am I going to pay when I obviously convert my plan to a permanent plan and as I said earlier insurance companies will charge you the premium at your then attained age so if I bought a term insurance plan at age 30 and at the age 45 I decide oh I want to convert it to a permanent insurance plan I will be paying the premium at my age 45 which is the DAT the age I am at at the time I decided to convert that policy now insurance companies have different approaches as to actually how old I am when I convert a policy there are three different approaches as they use to determine your attained age at the time of conversion first of all they can use something called age last birthday and so when you convert they will look at what was your birthday your last birthday how old were you and they'll use that age to determine your premium a second option is something called age nearest birthday age nearest birthday basically says which birthday is closest are you closest to your next birthday or are you in fact closest to your previous birthday so usually on age nearest we're usually looking at the six-month Point are you over that six-month point if you are it's going to be your next age or are you before the six-month point on uh and that will determine that you are still at your nearest birthday is still going to be your previous birthday so we have age last birthday pretty simple figure that out we have age nearest where we have to say am I over the six-month point or not some companies will use age next birthday and so you can see on the slide uh here's an individual a date of birth November 20th 1990 today let's say it's June 7th 2018 and if the company is using a last birth date approach the individual today is going to be for uh insurance purposes a age 27 if in fact they're using age nearest or age next they're going to be 28 years old now there are some companies today that in fact when you convert they will still use the premium at your original age so in my example if I bought the insurance at age 30 and I'm going to convert at age 45 they will use my age 30 to determine my premium for the P for the permanent insurance plan not a lot of these companies uh are these plans left today but uh that's uh an option that is available so when we're converting a policy we need to know what is our attained age at the date of conversion so that we can determine how much our premium is so let's review term insurance again advantages very simply low initial cost you're paying for Pure risk protection your premiums are guaranteed we have the renewable and convertibility feature that I talked about and in fact you can customize the plan uh we talked about multiple lives single lives uh and so you able to customize the plan specifically to what your requirement is if you have a mortgage of 325,000 you can buy a plan for $325,000 of coverage some of the disadvantages of term insurance are as we get older and as our policy renews our premiums are going to increase because our mortality is increased and past a certain age we cannot get term insurance any longer the other disadvantage of term insurance is that if we cancel our plan we actually get nothing back we have simply been paying a premium for Pure risk coverage and so on termination of the plan you've had risk coverage while you had it when you terminate the plan it really is uh you get nothing back when we talk about permanent Insurance we're going to see that that's different than term insurance in that permanent Insurance provides you some additional refund or additional cash value or account value that you can get back if in fact you decide to terminate the plan so common uses of term life insurance we want to cover risks that will end before a60 or 70 it's short-term risk for a no noon duration that we want to cover we can cover decreasing risks I talked about bank loans mortgages uh in some situations you may have an obligation under a divorce agreement where you one person may have to pay alimony for five years uh to an ex-spouse and in fact if that person uh passes away the obligation to continue making those alimony payments is still there and so in certain divorce obligations decreasing term insurance is used to make sure that the money is still there to meet those alimony payments for the remainder of the term uh again term insurance if you've got limited cash flow uh you need coverage but you don't have as much uh money or you decide uh no I simply want to have pure risk then term insurance is in fact inexpensive and some people decide that they're going to invest outside of their insurance plans in fact they think they can do better and they rather just simply have pure term coverage and any Investments or savings they're going to do outside with other alternative vehicles and so that wraps up our segment on term life insurance