Term life insurance is inexpensive and easy to understand
It gives you all the coverage you need and none that you don’t. That’s why it’s the best choice for almost everyone.
As the name implies, a term life insurance policy is good for a specific period of time; that can be one year, 10 years, 20 years or even up to 30 years. Given that you generally need life insurance only until you’ve managed to save up money elsewhere, just pick the term that dovetails with the time you need coverage. If you die during that term, your beneficiaries get a payout, known as the death benefit. If you die after the term expires, there’s no payout but most term life insurance policies will let you convert to an whole life insurance policy before your term ends that way you can make sure it will always payout.
If you’re past age 80, you’ll have a hard time getting term life insurance but most term life policies include an option to convert the term life policy to a Universal Life or Whole Life policy. This option can be useful to a person who acquired the term life policy with a preferred rating class and later is diagnosed with a condition that would make it difficult to qualify for a new term policy. The new policy is issued at the rate class of the original term policy. Note that this right to convert may not extend to the end of the Term Life policy. It may extend a fixed number of years or to a specified age, such as convertible to age 70.
Types of term life insurance
There are three kinds. There’s “annual renewable term,” which gives you one year of coverage at a time that you renew annually, “level premium term,” which you buy for a specific multiyear period – 10, 15, 25 or 30 years and “return of premium” which is like a level term policy but gives you all your money back after your term is over if you do not pass away.
Annual renewable term
This type is normally associated with group insurance that you buy at your employer (work). It is almost always more expensive that a level term life insurance policy.
Level term life insurance
lets you lock in the premium for that period; the annual premium is guaranteed never to change, from the first year to the last. That can be a smart way to insulate you from any premium increases. It’s like the peace of mind you get from a fixed-rate mortgage compared to an adjustable-rate one.
Return of premium
A form of term life insurance coverage that provides a return all of the premiums paid during the policy term if the insured person outlives the duration of the term life insurance policy.
For example, if you own a 20 year return of premium term life insurance plan and the 20 year term has expired, the premiums paid by the owner of the life insurance policy will be returned. Usually, a return premium policy returns all of the paid premiums if the insured person outlives the policy term.
The premiums for a return premium term life plan are usually higher than for a regular level term life insurance policy, since the insurer needs to make money by using your premiums as an interest free loan, rather than as a non-returnable premium.
More information about term life insurance go to www.wikipedia.org/Term_life_insurance