Deposit term insurance

Would you please forward as much information as possible on the concept of "deposit term"? S. S.

Deposit term was a new concept to me, and it must not be too widely known, as the questioner is a life insurance agent. A bit of digging discloses that deposit term insurance is a form of level term insurance running from 5 to 10 years.

In exchange for a lower rate per $1,000 of coverage, the buyer pays a deposit up front, the amount determined by numerous factors -- age of the insured, face amount of the policy, number of years involved, and the discounted rate. The upfront deposit provides income for the company to compensate for the lower rate. But more important, the up-front deposit ensures a continuation of the term policy. If the buyer allows the term policy to lapse, he forfeits the deposit. At the end of the deposit term period, the policy may be dropped or converted into a modified whole life policy.

Whether a deposit term policy actually saves the buyer any money needs to be studied in detail before opting for such insurance. Earnings that are lost when you make the deposit could pay a higher normal rate for annual renewable term coverage and provide greater flexibility to the buyer.

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