What is term life insurance?
Term life insurance is the most basic and affordable type of life insurance for the majority of people. Term life insurance is one temporary, it’s coverage only exists for a certain number of years. You select the ‘term’ of the policy - 1, 5, 10, 15, 20, or 30 years depending on your needs. If a life insurance policy does not end after a set number of years, it is called a ‘permanent’ policy.
How term life insurance works.
Term life insurance has similarities to other life insurance policies.
A standard term life insurance policy guarantees that the premiums are set to remain the same through the life of the policy. Knowing the exact amount that is due to the insurance company is helpful for most family’s when it comes to managing their expenses. The policy owner makes the payments on a regular basis- monthly, quarterly, semi-annually, or yearly, depending on the company and the client. The policy owner is free to stop making payments at any time but, if he or she does so, the policy will end and the life insurance company will no longer be obligated to pay a death benefit.
Most term life insurance policies guarantee a fixed death benefit. That means that the death benefit will be for the same amount regardless of how long the policy has been in force. The insurance company will pay the same amount if the insured dies on the first day of coverage as if he or she dies 1 day before the policy expires.
Keep in mind that term life insurance policies provide temporary coverage. For example, a 20-year policy will provide coverage for 20 years and no longer, unless the insurance company has other options available to the client. Rules do vary by company so discuss your options with your agent.
What happens when the term ends?
In most cases your life insurance is simply gone at the end of your term of coverage. If your are still alive, your beneficiary gets nothing. Hopefully, that’s not a bad thing! I would hope my family prefers me alive and health as opposed to a life insurance payout! However, there are alternatives with most companies that will allow you to do more than simply end your coverage.
Most companies will allow you to keep your policy. You keep paying premiums and keep enjoying coverage. BUT, after the agreed upon term of coverage is up, the premiums are no longer fixed at the low level they were. Your policy will probably stipulate new rates which are much, much higher than you were paying for all those years. Now, this may be worth the higher rates, however, if the insured party is ill and not far from death since the terms of this type of coverage are guaranteed renewable regardless of health. Continuing term life insurance is usually allowed only until the insured reaches a certain age, usually 90 years.
Another option is to convert the policy. Conversion means replacing an existing term life insurance policy with a permanent life insurance policy. Discuss your options with your agent if this is something you may consider as there are different rules and regulations depending on the company.
Who buys term life insurance?
Term life insurance can fit most peoples needs, not just that of the family breadwinner. Some reasons to consider term life insurance are to:
*Pay for child care
*Fund higher education
*Cover debts or liabilities (e.g. mortgage, funeral costs)
*Fund a buy-sell agreement for a business
*Protect against the loss of a key employee
*Replace an income stream
Having children at home, having debt, or owning a business are all reasons to use term life insurance for your coverage.
Buying Term Life Insurance.
The first step is to estimate your needs. Questions to answer are how long you’ll need coverage and how much coverage you’ll need.
Use our online life insurance quote engine to instantly compare rates from up to 40 different carriers. The information you provide is used only to determine the price that each of our life insurance companies can offer you for the policy you want.
After completing your life insurance quotes request you will see at list of prices. At VivaQuote Insurance, we only work with carriers who have high ratings from S&P and AM Best. Most clients choose the cheapest quote, but some prefer to choose the life insurance company with the highest financial rating.
Types of Term Life Insurance.
In addition to regular term life insurance, you might consider any of the following variations on the basic product:
Return of premium life insurance (ROP)—When the term of coverage ends, all of your premiums are refunded to you.
Annual renewable term life insurance (ART)—The term is just one year long and the rates will change from year to year, but you can renew your policy upon its expiration.
Renewable term life insurance—You can renew your term life insurance policy when it expires.
Adjustable term life insurance—Adjustable term life insurance lets you alter the size of the death benefit while coverage is in force.
Term life insurance quotes.
Ultimately, the health of the insured will determine the price of the insurance, so shopping for life insurance is not the same as a shopper a store because people’s life expectancies are all different.
It usually takes several weeks for an insurance company to determine an applicant’s life expectancy and establish a price for a particular life insurance policy for a particular person, but you can get an idea of cost and compare rates by running quotes. In just a matter of seconds, you can have term life insurance quotes from up to 40 competing life insurance companies.
On the quote form, you provide information about your own insurability (health class, height, weight, age, sex), and the insurer will respond by telling you an estimated price for coverage.
Quotes differ from offers from a life insurance company in that no insurer is going to issue you a policy based solely on what you write about yourself on a quote form. The carrier will want to verify health accurately. After all, an applicant may not know about risk factors in their lives.
If you’re as accurate as possible when you fill out your quote request, then it’s reasonable to assume that you’ll receive a quote that accurately reflects the final price for coverage. If the carrier determines that you are a higher risk than the information that was provided, then you will most likely be offered rates higher than what you were quoted. Also, if you are in better health than you estimated, you will actually receive lower rates than you were quoted.
