What Exactly Is a Term Life Insurance?
The two most common forms of life insurance policies are term life insurance and whole life insurance. The names are remarkably apt. A term life insurance policy lasts for a set period, say 10 years. If you die during that 10-year term, the policy will pay. If you don't, it expires and that's that.
A whole life insurance policy lasts for your whole life. You absolutely will die during the policy period for a whole life insurance policy. Although most insurance company will pay you the benefit before you die, if you live to be 100.
Typically, term life insurance provides protection for a period of from one to 20 years. The best way to think of term life insurance is as temporary insurance. A whole life policy is permanent insurance.
Term products usually are used when you have a temporary need, such as a mortgage, business obligations or a particular need for income when your children are young. Whole life products are effective when you have a permanent need, such as to supplement your surviving spouse's income, cover funeral costs, pay capital gains taxes, to make charitable donations and even pass a family business from one generation to the next. For this reason, it is usually the least expensive form of life insurance ad the one most likely to be used by cash-strapped young families. Its low cost allows you to buy higher levels of coverage at a younger age, when your need for protection is often greatest.
Of course, it would be simply if there were only one kind of term life insurance to consider. Instead, there are three. Level term provides a consistent amount of insurance throughout the policy period. Decreasing term, which is a good type of insurance to use to cover a shrinking debt obligation, such as a mortgage, starts with a specified face amount, which decreases annually until it reaches zero when the policy expires. Increasing term provides a growing amount of insurance, but the need for this type of protection is rare.
Some term life insurance policies are renewable. The benefit here is that you don't need to prove to the insurance company that you are still "insurable" to renew the policy. But, each time you renew, the premiums will be higher because you are older and, therefore, more likely to die during the policy's term. Many term life insurance policies are also convertible, which means they may be exchanged for another type of life insurance. Choosing a convertible term life insurance policy is one way to make sure you will be able to get permanent coverage at a later time, without having to prove that you are still insurable.
You won't want to stick with term life insurance for your entire life. By the time you reach 70 or 80 years of age, the premiums for a term policy usually approach the face amount of the insurance, because the insurance company figures you are going to die soon.
For more information on buying affordable whole life insurance policy, getting cheap term life insurance online rates or low cost universal life insurance quotes, please visit the following website: Life Insurance Resource Guide
Skyjoe. All rights reserved. This article may be freely distributed as long as it remains unaltered inclusive of the active links and the copyright notice. No alteration is allowed without express written permission from the author.
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