Term Life Insurance – Understanding the Basics
Life Insurance can be divided into 2 categories: Term insurance and permanent insurance (e.g. whole life and universal life). This article will focus on the features and benefits of Term insurance.
Term insurance is designed to provide death protection for a specific and limited period of time such as 10, 15, 20, or 25 years. During this period of time premiums (i.e. rates) are set a single level. Afterwards the policy resorts to the renewal stage where insurance coverage is still provided, but the rates increase annually. If the insured dies while the policy is in force, the policy will “mature” meaning the insurance company pays the the face value (aka death benefit) to the policy’s beneficiaries. Term life policies generally feature a fixed termIf the insured is still living at the end of the policy’s term, the policy will expire
Term insurance in its many forms is the most affordable protection available for the premium dollar. It is particularly suitable for a person who has a temporary need for insurance, for a person who may want permanent insurance in the future, or for the person who has the discipline to buy Term and really invest the rest.
Many policies contain a convertibility option, which allows you to convert the term policy to permanent insurance (such as whole life or universal life) without the need for a medical exam.
There are five important types of Term Life Insurance. Many policies contain combinations
Level Term – Provides a specific and constant amount of insurance throughout the life of the contract. generally 10, 15, 20, or 25 years
Decreasing Term – If the insurance needs of the policy owner decrease over a period of time, it would be appropriate to purchase a policy where the death benefit also decreases. An example would be where the insured mortgage payments have ceased whereby eliminating the need for mortgage protection. Were a level Term policy be purchased this event would create an excess of insurance coverage.
Increasing Term – If the insurance needs of the policy owner increase over a period of time, it would be appropriate to purchase a policy where the death benefit also increases. Increasing term is more expensive than Level Term.
Renewable Term – This feature provides the policy owner with the right to renew the policy without showing proof on insurability. During the renewal stage, insurance coverage is still provided, but the rates increase annually.
Convertible Term – With this form of Term Insurance comes the right to renew a Term policy to a new for of permanent insurance without having to show proof of insurabilty
A life insurance contract which provides coverage for a specified period of time and expires without value if the insured survives the stated period. The face amount can be structured to remain constant throughout the term (Level Term), increase over time (Increasing Term), or decrease over time (Decreasing Term), Many Term policies are also renewable and converetible up to some stated age. As a general rule, Term Life Insurance does not accumulate cash value.
Many factors determinne how much you will pay for
, which are discussed in detail at a1term.com.com
Jim Wolf is president of A1 Term – a life insurance company – specialists in the term life insurance industry. For more information go to <p><a href="http://www.a1term.com/">A1 Term</a></p>
