Term Life Insurance Explained

Term Life Insurance Explained

In todays competitive life insurance industry, term life insurance is the most popular type of insurance policy sold in the United States. Term life insurance may prove to be popular because term life insurance premiums generally have the lowest premiums among the various life policies available on the market.

Term life insurance, itself, gets its name from the fact that this particular type of insurance policy provides coverage for a certain set period of time, or term. Depending on your specific insurance needs, term life insurance can last a duration of 1, 5, 15, or 20 years, or even longer in some cases.

Additionally, term life insurance allows you to determine how much money will be paid out to your beneficiaries. However, in general, term life insurance policies are usually offered in 5-year increments with 30-year maximum terms.

There are some exceptions to the above rule though, since some term life insurance policies last only one year and require renewal on an annual basis. However, it is important to note that there are not many companies that will renew a policy to individuals who are beyond 70 years of age.

Keep in mind that at the end of an insurance renewability period, all life insurance ceases, and the term life insurance policy loses all monetary value. This type of insurance policy also only provides life insurance coverage, and in general, term life insurance has no intrinsic value if the policy is cancelled prematurely.

Of course, term life insurance will pay your beneficiaries the agreed upon coverage amount if you do happen to die while the life insurance policy is still valid. (For example, a $250,000 term life insurance policy provides a $250,000 pay out to beneficiaries).

Since the entire costs of the insurance premiums price go towards the cost of the death benefit payment, insurance companies can afford to offer this type of life insurance at the cheaper rates.

In general though, the cost of term life insurance premiums depends on the age, health, and lifestyle choices of the policyholder at the time of purchase. The premiums, of course, are higher for older individuals, and for high-risk policyholders, including individuals who participate in extreme sporting activities, or who smoke cigarettes. To verify the health of a potential term life insurance holder, most insurance companies require a medical check-up prior to issuing this type of life insurance.

Although most of the term life insurance companies guarantee insurance policy rates, some policies can vary with regard to premium costs and the type of coverage available. Additionally, some forms of term life insurance policies permit you to switch to another type of insurance policy later on. Thus, term life insurance policies can be somewhat flexible as well.

Your beneficiaries enjoy a huge benefit of term life insurance ? they receive their benefits tax-free. This occurs because there is no additional residual monetary value involved with term life insurance.

Overall, depending on your particular needs and life circumstances, term life insurance may be your life insurance policy of choice.

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