What is Term Life Insurance

Term life insurance is a simple and affordable way to ensure your beneficiary financial security in the event that you die within the period of, or term of the policy. The term of the policy can vary from one to thirty years of coverage. The face amounts stay level throughout the term and generally begin at $25,000 and increase to meet your specific needs.

Term life insurance is affordable because it does not accrue a cash value and only pays the death benefit. Therefore, the initial premium is much lower, allowing you to easily budget for your coverage. This option offers great value to an individual that needs a death benefit for a specific period of time. For example, term life insurance is a good choice for people that have started a family and need to consider paying for college, have amortized loans, or have a specific financial burden that will decrease over time. After the kids graduate from college, the amortized loans are paid down, or the specific financial burden has decreased, the need for cost effective high levels of coverage may not be as great. At this time your options vary.

Term life insurance policies (10 year, 20 year, 30 year) usually can be renewed at the end of the term. Perhaps at this point in your life a shorter term and smaller face value will adequately meet your needs. Keep in mind that there is a direct correlation between age, health and premium costs. Subsequently, with advanced age and the health issues associated with age, your premiums will probably be higher and eligibility is not as easy. You may want to consider converting to a permanent life insurance policy at this time.

The easiest way to understand term life insurance is to equate it to leasing a car. Leasing is a great way to drive a nice car for a temporary period of time. It is generally cheaper to lease than it is to buy. Your monthly payment is lower and you enjoy the benefit of driving a car that you may not be able to afford to buy. The car is yours to take pleasure in for the term of the lease, however, you never accrue any cash value or equity in return for your cash outlay. At the end of your lease term you turn the car in. Of course, you have the option to then buy the car, but your monthly payment may be higher depending on your residual. Perhaps your needs have changed and you want to invest in buying a car. You will accrue a cash value and equity therefore you are willing to have a greater out of pocket expense. At this point leasing a may not have the same value for you.

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With all lease options conditions may vary. This is consistent with term insurance policies, as well. For example, some term life insurance policies may include options such as accelerated death benefits, disability waver of premiums and accidental death benefits. Other term life insurance policies do not include these provisions and require rider for an additional expense. Additionally, some policies enable you to convert your policy to a permanent life insurance during a specific time frame early in the term. Some policies even allow this conversion without the standard health evaluation that is usually required.

Term life insurance is a cost effective way to ensure financial security and continuity of the standard of living for your beneficiaries. Be sure to consider how long you will need the policy, if the policy is renewable and or convertible and carefully review what provisions your policy includes to determine which option is the best for you.