A Term Life policy offers coverage only if death occurs during a specific period of time, which coincides with the terms in which the insured member is required to make a monthly premium. A Term Life policy pays a benefit to the beneficiaries only if the policy holder dies during the time period for which the policy was initially contracted and has remained current on their annual or monthly premium payments.
This type of policy is beneficial for parents of young children, people with debt obligations and also home buyers. It can be renewed after the initial term has ended and it may also be converted to a whole life policy. The premiums are based on your age and your health status. Purchasing a new Term policy at the expiration of your existing policy will result in a higher premium and you may not qualify if you have disqualifying health issues.
Term Life is a "death benefit only" policy that you buy for a specified length of time. Think of it like leasing a car: you pay for the use of the car for a specified period and when the contract period is over, you return the car.
Term Life is referred to as "benefit only" insurance because unlike the various types of permanent life such as Whole Life, it carries no "cash surrender value". Because of this, Term Life insurance premiums tend to be very affordable. Young and relatively healthy individuals can often obtain a policy with limited or no medical background check. It is ideal for families that are just starting out, or for the family income provider who wants to make sure his or her family will be protected, but may not be able to afford, or desire a permanent life policy. However, understand that as a person ages over the period of the term, monthly premiums may increase.
It is often an ideal option to insure a second spouse, or for single people, even for children, just to make sure the often unexpectedly expensive costs of a funeral are covered. There are many insurance and financial professionals who suggest that those who purchase a Term Life policy can make up for the investment component of a Permanent Life insurance policy by investing the cost savings between the two on their own.
The earlier you purchase a term life policy and the healthier you are, the cheaper the premiums will be over the term of the policy.
Annual Renewable Term Life policies are those that are purchased year-by-year. The next year you do not have to prequalify. Simply choose to renew at what may or may not be an increased rate. Rates for Annual Renewable policies are at historic lows. A young healthy person can get $250,000.00 for only a few hundred dollars per year.
There are very good rates these days on Term Life. The premium is fixed and will not go up for the life of the term, usually 10,15, 20 or 30 years. It is not uncommon for a healthy non-smoking 40 year-old male to obtain a 20 or 30-year policy with a fixed premium of less than $30 per month.
So just how much Insurance should you buy? Many things factor into that answer, but at the minimum the experts say purchase enough insurance to equal at least 5-7 years of your present salary. If you have young children, make that around 10 years. So, if you make $50,000 a year that means at least $250,000 to $500,000 in coverage. Feel free to use our Life Insurance Calculator to help determine the right amount for your circumstances.
Term Life Insurance is an affordable life insurance product to ensure that your loved ones are protected in the event of your unexpected death, for a specific term period of time.
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