Term Life Insurance

Term Life Insurance policies provide life insurance protection for a limited period of time. As the name suggests, it is for a specific term, a number of years, or until the insured reaches a specified age. If the insured dies during the coverage period, their beneficiary (the person named to collect the insurance proceeds) receives the policy death benefit. If the insured live to the end of the term period, the policy simply terminates and they get nothing back, unless it automatically renews for a new period.

Term policies are available for periods of 1 to 30 years or more. As you get older, your chance of death increases. To account for this increasing risk, your premiums will in turn rise at regular intervals. This is the reason, premiums are quite inexpensive when you are younger but will become much more expensive as you get older.

Why you need a Term Life Insurance Policy

Types of Life Insurance Policies

There are two main types of life insurance: Term Life Insurance (Temporary) and Permanent Life Insurance (Cash Value Insurance).

Term life insurance

Term Life Insurance Advantages & Disadvantages

Advantages

Disadvantages

Types of Term Life Insurance

Renewable Term: - Renewable term plans give you the right to renew for another period when a term ends, regardless of your health condition. The right to renew the policy without evidence of insurability is an advantage to you, the policy holder. However, expect the premium to increase with the new term.

Convertible Term: - A Convertible term policies often allows you to exchange the policy for a permanent plan. You are only allowed to exercise this option during the conversion period. The length of the conversion period will vary depending on the type of term policy purchased. The premium rate you pay on conversion is usually based on your "current attained age", which is your age on the conversion date.

Level or Decreasing Term: - Under a level term policy the face amount of the policy remains the same for the entire period. With decreasing term the face amount reduces over the period. This policy is often sold as mortgage protection with the amount of insurance decreasing as the balance of the mortgage decreases. If the insured dies the proceeds of the policy can be used to pay off the mortgage.

Adjustable Premium: - Normally, insurers do not have the right to change premiums after the policy is sold. Adjustable premium insurance, however, allows insurers to offer insurance at lower "current" premiums based upon less conservative assumptions with the right to change these premiums in the future.

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All life insurance policies have one thing in common – they’re designed to pay money to the “named beneficiaries” upon death of the insured. Always review your policy or contact your agent to identify the limitations and exclusions of your coverage.

What is an accidental death & dismemberment policy?
An accidental death & dismemberment policy is a form of life insurance that's more limited and covers deaths only when they’re accidental. It generally doesn’t cover deaths caused by illness and disease.

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Use this chart to quickly compare the five key types of life insurance policies:

Life insurance type	Coverage length	Best for ages	Builds cash value?	Medical exam required?	Death benefit amount
Term	10, 15, 20, 30 years	18 – 65	No	Varies	$100,000+
Whole	Your lifetime	18 – 65	Yes	Yes*	$50,000+
Universal	Your lifetime	18 – 65	Yes	Yes	$50,000+
Variable	Your lifetime	18 – 65	Yes	Yes	$50,000+
Final Expense	Your lifetime	50 – 85	Yes	No	$2,500 – $35,000

How much life insurance can you afford?

The cost of your life insurance will depend on a number of factors: on your age, your health, the type of policy you’re applying for, and how the policy is designed. Typically, permanent insurance, with its flexibility and multitude of uses, is much more expensive than term insurance. As you get older and/or your health diminishes, insurance carriers identify you as being a higher risk, and therefore charge you higher premiums. It’s best to lock in coverage while you’re young and in good health. How much coverage you need can be calculated based on your income, your projected future income, your net worth, and your age. In the case of key-person business insurance, the potential loss of profitability that would result from your passing would be a key component in the calculation. Insurance carriers consider each of these factors when determining the amount of coverage for which you qualify.

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