 | Term Life Insurance |
 |
|
As the name implies, term insurance provides protection for a specific period of time and generally pays a benefit only if you die during the "term." Term periods typically range from one year to 30 years, with 20 years being the most common term.
One of the biggest advantages of term insurance is its lower initial cost in comparison to permanent insurance. Why is it cheaper when initially purchased? Because with term insurance, you're generally just paying for the death benefit, the lump sum payment your beneficiaries will receive if you die during the term of the policy. With most permanent policies, your premiums help fund the death benefit and can accumulate cash value.
Term insurance is often a good choice for people in their family-formation years, especially if they're on a tight budget, because it allows them to buy high levels of coverage when the need for protection is often greatest. Term insurance is also a good option for covering needs that will disappear in time. For instance, if paying for college is a major financial concern but you're pretty sure that you won't need life insurance coverage after the kids graduate, then it might make sense to buy a term policy that'll get you through the college years.
But what happens if you buy a term policy only to realize at the end of the term that you still have a need for life insurance? Most policies will give you the option to renew your policy when you reach the end of the term. Logically, your premium costs will be much higher since age is one of key factors used to determine life insurance premiums. To renew the policy, you also may have to present evidence of insurability. If you're still in good shape, with healthy living habits, you might requalify at a reasonable rate. But if your health has deteriorated, you may find that with continually increasing premiums it's too expensive to renew your policy or you may not even requalify.
If you're considering a term policy, make sure you carefully consider how long you'll need the coverage. If you're pretty sure that your needs are temporary, then term insurance should be an excellent choice. If you think there's a real possibility that you might need the coverage for a long time, remember that if you want to renew your term policy after it expires or buy a new term policy at that time, your age, health status or other factors may make coverage very expensive.
Another provision that is very important is something called convertibility. This valuable feature allows you to convert your term policy to a permanent policy without submitting evidence of insurability. Being able to convert to a permanent policy is a great option to have in the event that circumstances in your life change such as failing health or maybe just the realization that coverage is needed for a longer period of time than you originally anticipated. That's why when purchasing a term policy, it's never a bad idea to find out what kind of permanent policies are offered by the company you are considering. The insurance companies represented by The 1-800-TERM-LIFE Financial Services Group all have a wide array of permanent plans should you wish to convert your Term Policy.
A new breed of Term Life is called a return-of-premium (ROP) term. With these policies, if you keep the policy in force for the entire term, say 20 years, the insurance company will refund the premium payments you made over that 20-year period. Of course, there is a price to be paid for this added benefit. Another factor to consider is that term insurance rates have dropped considerably over the past decade, mostly because people are living longer. If you own a standard term policy, there's really no harm done in dropping that policy in favor of a newer and cheaper term policy. But if you own a return-of-premium policy, dropping the policy before the full term has expired means that you will have paid a high price for your term insurance coverage and in most cases the premiums you paid won't be refunded.
Contact 1-800-TERM-LIFE to help determine which plan is best for your situation.
 |
