Top Six Things You Should Know About Term Life Insurance


Term Life Insurance is ideal for small budgets and provides temporary life insurance protection for a “term” in one’s life, such as one’s child-raising years, or later in life for a period of time. It is the cheapest type of life insurance you can buy. Here is a list of 6 things you should know when searching for a term life insurance plan:

1) Unlike permanent life insurance, term insurance expires, and is only purchased for a specific period of time. The most commonly available terms are 1, 5, 10, 15, 20, 25, and 30 year terms.

2) The three main types of term insurance are Level Term, Increasing Term, and Decreasing Term. With the level type, the face amount of the policy remains constant over the entire term of the policy. So for example, if you buy a $100,000, 20 year, level term insurance policy you will have $100,000 of protection for the next 20 years. An increasing term policy means that the policy has an increasing face amount. So basically your monthly premiums will usually go up as the coverage keeps up with the current inflation rates, or if you expect your business or employment income to keep on increasing over time, and you want to make sure your life coverage keeps up with your income. When it comes to decreasing term insurance, the amount of coverage over the life of the policy decreases. However, the plan has level premiums over the term and is usually lower than they would be for a similar level term insurance policy. Decreasing term insurance is useful for loans or mortgages which decrease as they are paid off, and thus are much cheaper in the long run.

3) The premiums don’t change (Usually). The cost for a term insurance policy usually remains pretty constant over the entire term of the policy. Therefore, if you buy a 20 year term insurance policy when you are 20 years old, you will usually pay the same monthly premium until you’re 50 years old. A noteworthy exception to this rule is for increasing term insurance, your premiums increase along with increasing coverage.

4) A renewable and convertible option (R&C option) – This is a common option you can buy with term life insurance; the renewable option allows you to renew your policy for another term without having to go through additional health questions or testing. Keep in mind your premiums may change depending on age and length of new insurance policy. The convertible options allows for the conversion of your term policy into a whole life insurance policy, which is more expensive and new premiums will surely be more pricey.

5) Term insurance is ideal for short term life insurance needs. Many people often only require life insurance until they’ve built up enough savings and investments so become self-insured, or may only need it in place to make sure that loans, credit cards, and mortgages can be paid off in the even they pass away before all debts are paid off.

6) Term life insurance is the cheapest form of life insurance. You can purchase a large amount of insurance relatively cheaply, and with the money saved by buying term insurance instead of permanent insurance, you can start on your own savings plan. This approach, called “buy term and invest the difference” is an economical method of building savings, just like you would if you had a permanent life insurance policy, while having more control of your investments, and often much better returns so your savings will grow faster.

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