Term Life Insurance

As with most insurance policies, a term life policy requires the insured to make regular premium payments for the length of the term. When the term expires, the coverage either lapses, can be renewed, or can be converted into a different form of life insurance such as whole life. 

Premiums on a term life policy are typically based on a person’s age, health and life expectancy, and the premiums typically remain flat throughout the course of the term. The policy term can extend anywhere from one year to 30 years. Once a term policy expires, the premiums may be recalculated for the renewal period based on updated circumstances. 

• It’s inexpensive – premiums for term life insurance are much lower than whole life insurance because the policy lasts for a predetermined time, and if you outlive the policy, there are no insurance benefits. 
• Flexible options – because of its simplicity, term life can be purchased in a variety of terms and benefits, starting as short as one year. As your needs change, you can adapt the coverages to fit your different circumstances. 
• Simplicity – term life is easy to understand and easy to compare. With term life, you know how much you’re paying, how long you’re covered, and how much the policy will pay in the event of your death. 

• Lack of cash value – unlike a whole life policy, which grows in value over time, a term life policy holds no value outside of the death benefit. If your policy expires before your death, you’ll need to obtain new coverage. 
• Increasing costs over time – as you age, and with each term policy that expires, it becomes more expensive to insure you. Term policies for a 25-year-old look incredibly inexpensive, because they are. But as you age and especially if you acquire some health issues along the way, the costs of getting new term-life insurance could rise dramatically.

There are different types of term life policies available. Understanding the characteristics of each can help you determine which might be right for your circumstances. 

• Annual or yearly renewable policies – have no set term, but essentially last for one year. Premiums often start out low, but will increase as the insured ages. Yearly renewable policies generally make sense for younger individuals, but the increases over time can make them less cost effective for aging persons. 
• Level term policies – offer both a fixed premium and fixed death benefit. These usually cover a term of 10 to 30 years. Because the costs of insuring you increases over time, premiums on this type of policy are typically higher than annual renewable policies. 
• Decreasing term policies – decrease the amount of the death benefit according to a predetermined schedule. This type of policy might be used in conjunction with a mortgage, where the rising equity amounts offset the declining payout amount. 

Generally, term life policies are useful for individuals and families who want low-cost coverage that provides them peace of mind, and for individuals looking to carry coverage for a specific length of time. Every individual and family has its own set of unique circumstances, which is why a knowledgeable and experienced agent can help determine exactly what policies or combinations of coverage might be right for your situation.