What is Term Insurance?
Term insurance is a basic type of insurance coverage that you can buy, as the name implies, for a specified period of time. Term insurance is strictly insurance, and has no cash value. It also offers the lowest premiums. When a term life insurance policy expires, you must renew it to continue the coverage, and premiums increase in proportion to your age.
When purchasing life insurance, it’s important to understand the difference between term insurance and other types of policies. Term insurance, also known as term life insurance, is the original form of insurance protection. It builds no cash value and only provides coverage for a specified time period that can be anywhere from one year to 20 years. In comparison, permanent life insurance policies such as whole life, universal life, or variable life insurance are granted for the life of the insured person and the payout is guaranteed at the end of the policy. Although permanent life insurance policies are sometimes used as a type of financial investment, the function of term insurance is similar to that of auto insurance or health insurance. Claims will be fulfilled if the premiums have been paid and the contact has not expired, but the insured person does not receive a return of the premium payments if no claims are filed. Term insurance is purely a form of risk protection designed to
• A: Term life insurance is insurance that lasts for a specific time, such as 10, 20 or 30 years. The policy pays a death benefit in the event the insured dies during the specified period. Since term insurance is for a limited period and accumulates no cash value, the rates tend to be low for a given amount of insurance. The important thing to remember with term insurance is that the policy ends when the term ends. Some term policies might include an option to renew or to convert the term policy to a whole life policy. • Term policies can be: • level, (the amount of coverage is fixed during the period of coverage) or declining, (the coverage drops according to a specified schedule). • renewable, (the policyholder can continue the coverage at the end of the term by paying further – higher – premiums) or non-renewable, (the policyholder cannot continue the coverage at the end of the term). • convertible, (to whole life or other cash value insurance) or non-covertible, (no convertibility
This type of insurance can be described as basic life insurance without anything added. It provides a guaranteed death benefit for a specific period of time. Some term life policies have a guaranteed level death benefit. This really means that it doesn’t go up or down, it remains the same for as long as you own the policy. These include the yearly renewable term life insurance policy, the 5 year guaranteed level term life policy, the 10 year guaranteed level term life insurance policy, the 15 year guaranteed level term policy, the 20 year guaranteed level term policy and the 30 year guaranteed level term life insurance policy. Other term life policies may decrease over time (e.g the decreasing term policy) This policy is usually used as mortgage protection insurance. The Advantages Of Term Life Insurance. • Not everyone has sufficient income to pay for permanent life insurance like whole life, universal life and variable life insurance. These people need to provide ample protection for
Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid. Term insurance is initially much less expensive when compared to permanent life insurance. Unlike most types of permanent insurance, term insurance has no cash value. There are many different types of term insurance policies available. Many policies offer level premiums for the duration of the policy, such as 10, 20, or 30 years. These are often referred to as “level term” policies. While premiums for these level term policies remain level for a set number of years, after this time period the premium increases significantly, making the policy cost prohibitive. Most term policies have a built-in privilege to convert to a permanent policy regardless of any changes in the insured’s health. (To learn more about term
