Term Life Insurance Basic Guide

If you are 40 years old or older, it may be time to think about life insurance.  While you are relatively young, probably have a stable job, most likely are healthy, and assume that this situation will continue indefinitely, do you really want to take a chance with your family’s future? Being prepared with a life insurance policy isn’t about your well-being, it’s about your family.  Should something happen to you, having a life insurance policy that you know your family can tap into to relieve the financial burden of your absence is one way to preserve your peace of mind that you have done all you can to secure their financial stability.  So, you ask, “What are my options when it comes to life insurance policies?”

While life insurance providers have all sorts of life insurance policies to choose from, you’ll find that most policies fall into one of two categories: Permanent life insurance and term life insurance.  Of these two categories of life insurance policies, the one that is generally the simplest and least expensive is the term life option. Usually having lower premiums than permanent life insurance policies, term life insurance policies are popular among people between the ages of 40 and 60. Term life insurance policies are able to offer low premiums because the duration of a term life policy is at a fixed time, usually somewhere between one and thirty years. With benefits paid only if you die during the time your policy is in effect, term life insurance premiums can be lower because generally the insurer only pays benefits if you die during the term period allotted in your plan.

Term Life Insurance Basics

To understand term life insurance basics and give you a clear picture of just what term life insurance is, let’s first look at the reasoning behind an insurance company offering a term life insurance option in the first place.  Term life insurance gets its name because this type of life insurance provides you with benefit coverage for a pre-defined time period (“term”).  Because there is a finite beginning and end to your life insurance coverage, term life insurance plans can be purchased with premiums being fixed, meaning your premiums remain unchanged for the duration of the term you chose  to purchase it for.  And, while you may chose from a variety of options in the purchase of your term life insurance policies (such as duration, terms, and premium amount), these plans pay benefits only upon the event of your death.  Many people choose term life insurance plans to assure that their premiums never increase and others choose them because they only need an insurance policy for a specified amount of time.  Regardless of why you need a term life insurance policy, they are generally the most inexpensive type of insurance policies on the market.

Your Guide to Term Life Insurance Information

Term life insurance policies come in five different types, each offering its own unique advantages, depending upon your needs. These five types include:

(1) Level Term Life Insurance. This type of term life insurance provides you with a fixed amount of coverage, where premiums remain fixed and the term remains fixed.  Offered to you from ten (10) years to thirty (30) years, with some policies specifying a terminating age (usually 65), level term insurance is probably the most simple and inexpensive of your options for term life insurance.

(2) Renewable Term Life Insurance.  This type of term life insurance, while it has a specified term, is renewable.  And, the renewals of these policies typically don’t require that you undergo a physical exam or prove that your health is good each year to continue coverage. Premiums for renewable term life insurance are usually based on your current and attained age.

(3) Decreasing Term Life Insurance.  This type term life insurance policy provides benefits that gradually decrease as the term decreases.  Decreasing term life insurance premiums remain fixed, but  the value of coverage decreases a bit year after year as the term expiration time approaches.  Decreasing term life insurance policies are popular among policy holders who want to use the benefits to pay off mortgages since your benefits decrease as your mortgage payments decrease.

(4) Convertible Term Life Insurance.  This type term life insurance plan allows  you the option to exchange a term life insurance policy for a permanent, or cash-value policy without the requirement to have a medical exam or provide evidence of your insurability.  A popular life insurance choice for younger people, convertible term life insurance policies offer inexpensive premiums with the option to convert or upgrade coverage to a permanent or cash-value term policy as your family grows.

When considering the purchase of a convertible term insurance plan, keep in mind that a conversion will probably result in higher monthly premiums. In addition, the typical time allowed to convert a policy is considerably shorter than the duration of the term coverage, so contact your agent well before your term insurance period is to end when you think you may want to convert your policy.

(5) Return of Premium Term Life Insurance. This type of term life policy provides you with a way to recoup some of the expense of the premiums paid at the end of the policy term. This return is minus administrative charges, fees and other costs. And, you must keep your policy completely up-to-date until the end of the designated term, otherwise, you forfeit any return you may be entitled to.

Steps to Take When Purchasing Your Term Life Insurance Policy

Once you determine what type of term life insurance policy you want to purchase, you are well on your way to completing your purchase.  But, before signing on the dotted line, take some time to:

(1) Investigate companies in your state that offer the type term life insurance policy you want and get as much term life information and advice you can to assure you are getting what you want at the price you want.

(2) See your doctor for a medical exam in case the company you chose requires proof of health and insurability.

(3) Get quotes from term life insurance companies that offer the coverage you want.

(4) Carefully fill out the application from the company you choose to eliminate any delays in your coverage.

(5) Carefully read any documents you receive from any term life insurance company before signing to ensure you have the coverage you want at the price you can afford.

(6) Sign the policy and pay the premium.

The older you are when you purchase a term life insurance policy, the more expensive your premium will be. Don’t delay if you plan to purchase term life insurance; delay will cost you more in money and peace of mind.  We all want our families to be well-taken care of in our absence.  Purchasing a term life insurance policy will help assure that your family’s financial future is a stable one.