No Load Term Life Insurance

The concept of life insurance dates back to the Greco-Roman world when societies were established in order to cover the expenses that would have to be incurred by the families of the deceased. In the US, life insurance products were first marketed in the late 1760s. Life insurance can be best understood as a contract, between the insurance company, the insured person and the policy holder, that entitles the beneficiary to an amount of death benefit based on the premium paid by the policy owner. Generally, the insured and the policy owner are one and the same. In certain cases, the policy owner turns out to be the beneficiary. Hence, life insurance is a contract between 3 parties. Generally, life insurance policies can be classified into 2 categories: term life insurance and whole life insurance. Again, term life insurance can be classified on the basis of the existence or the absence of a load.

Understanding Term Life Insurance
In case of a term life insurance policy, the policy owner is expected to pay a monthly premium. In return, the insurance company guarantees to pay a certain sum of money to the beneficiary provided the insured person dies during the term of the policy. In other words, the beneficiary will not receive any compensation if the insured person dies after the term of the policy or manages to outlive the policy. Moreover, a term life insurance policy does not have a savings component. It only provides a predetermined amount of money that is stated in the insurance contract as the 'death benefit.' Whole life insurance policies have a higher premium requirement as compared to term life insurance policies since the former guarantees a death benefit that has a savings component regardless of term constraints. The difference between term and whole life insurance has been discussed in great detail in the article titled, "Term Vs Permanent Life Insurance". The monthly premium for term life insurance policies can further be reduced by opting for a no load or a low-load term life insurance policy.

How Does a No Load Term Life Insurance Work?
A no load term life insurance policy or a low-load life policy does not require the policy holder to pay an annual fee. The annual fee is often charged by the insurance companies for advertising and for compensating the agent for selling life insurance policies. The amount of money, that is charged as annual fee, can vary between $10 and $100. Generally, the monthly premium that is paid by a person includes the annual fee. Hence, the premium is calculated as:

Annual fee + Premium per unit that varies with age * Number of units denominated in 1000s

A no load term life insurance policy eliminates this annual fee. The insurance agent does not get paid by the company in the form of commissions. Hence, a policy owner would be required to pay the the following amount as monthly premium: Premium per unit that varies with age * Number of units denominated in 1000s

Advantages of a No Load Term Life Insurance Policy
Considering that the insurance agent is not paid by the company, it's the client's responsibility to compensate the agent for the services rendered. Despite having to pay the fee directly to the agent, the client benefits since the amount of annual fee can now be used towards augmenting the amount of death benefit.

No load term life insurance policies can be purchased from advisors often known as fee only advisors. In most states, the no load insurance professional / advisor is expected to be licensed in order to market policies to clients. A few companies also sell no load or low-load term life insurance policies directly to the clients.