What Exactly Is Term Life Insurance?
There is a lot of life insurance available out there but Term Life insurance is regarded as the most affordable. In general, a life insurance policy pays a monetary benefit to the named beneficiary upon the death of the insured. Whole Life, Variable Life, and Term Life are the popular kinds of insurance. Some the premium in the Whole Life insurance policy goes to the investment fund but in the Term Life insurance policy there’s no such thing as this. Which means the premium in the term policy pays for the insurance.
Term life insurance offers protection for up to thirty years, with the most common terms being ten and twenty years. The coverage has no cash value that’s why it’s less expensive compared to Permanent or Whole Life insurance. For example a 30-year-old, non-smoking male may only pay $2,500.00 a year for a whole life policy with a death benefit of $250,000.00. However, the same policy in term form may only cost $300.00 per year. The Internet has made purchasing term life insurance even easier, but it can be difficult to navigate through all the information available. You need to make sure you’re trusting a reliable company with something important like a life insurance.
Term life-insurance policies provide coverage only for a specified length of time. That term can be anywhere from 1 to 20 years, depending on the policy you select. During the term the beneficiaries are entitled to receive the specified death benefit when you die. So when you have a 10-year policy for $100,000 and you suddenly die on the ninth year your beneficiaries will get the full $100,000. Failure to pay the premiums, of course, will cause your policy to be cancelled before the end of the term. Because the insurance company is betting that you will not die during the term, the insurance premiums are more affordable, because the risk to the company is lower.
As with most insurance plans, with a term life plan the insured will still have to undergo a basic physical exam conducted by a nurse to make certain they are insurable. As long as the premiums are paid then the policy will remain intact. Term policies come in many varieties. But the popular models are the annual, 7-year, and 10-year policies. The annual term policies have a premium that increases slightly every year while the 7 and 10 year term policies have premiums that are the same for 7 to 10 year period.
While term life insurance is one option, you may want to consider other choices before purchasing a policy. With Whole Life, your policy can establish cash value, which can be used as collateral for a loan from the insurance company. Beneficiaries also receive a guaranteed death benefit. Universal life is much like Whole Life but offers more convenience. For example you may pay bigger premiums to build up cash value sooner or you can quit paying premiums once sufficient cash value has accrued to pay for them. Discuss all of your options with a trusted life-insurance agent before choosing a policy.