Term Life

Upon the policyholder’s death within a designated amount of time, a term life insurance policy will pay an agreed upon amount of money to one or more beneficiaries.

What Is Term Life Insurance

Rather than covering the remainder of your lifetime from the moment you purchase a policy, term life covers a period of time, usually between 10-30 years.

Term life is essentially a contract between you and the insurance company, one that states that you will pay a specified monthly premium, and that the company will provide an established death benefit if the policyholder passes away within the given length of the policy.

There are 4 main types of term life plans you can purchase:

  • Level-Premium Term Policies: Your premium stays the same throughout the term. One of the most common types.
  • Year-Renewable Term Policies: Renew your plan yearly rather than after 10-30 years with a required medical exam each year. Will often cost more than other term policies over time.
  • Return-of-Premium Term Policies: At the end of your term, the insurance company pays back all of your premiums. However, premiums are much higher than other term policies. 
  • Guaranteed Issue Term Policies: With this policy, the insurance company does not consider your health for eligibility, making it much easier to qualify for. Premiums are much higher as a result.

The Cost of Term Life Insurance

The overall cost of term life is less than other life insurance policies. You will be required to pay a monthly premium, and that is about it. Premiums are based on a variety of personal factors, including age, health, and sex. Men pay more than women, healthy people are eligible while unhealthy people may not be, smokers pay more than non-smokers, and older people pay more than younger people.

The Benefits of Term Life Insurance

Term life provides a less-expensive insurance policy with the same death benefit options. Because policies last often a max of 30 years, your insurer can offer a lower premium. And, insurance companies will give you an option to renew your policy. And, if not, you can seek out another term life plan elsewhere.

Term vs. Whole & Universal Life

Unlike term life, whole and universal life are considered “permanent” policies, meaning that they do not have to be reevaluated after 10-30 years. When considering your options, then, keep in mind that the lower cost of a term life plan means that you must abide by the term and not carry it indefinitely like a permanent option. However, this is often well worth it for beneficiaries.

Term life policies also do not have an investing or cash value possibility like whole or universal life.

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