Term Life Insurance Policies
Term life insurance may be the simplest form of life insurance available, but with the number of life insurance companies competing for your business, you have a large number of options for your coverage. Here are several tips to help you compare term life insurance options and decide which best meet your family’s financial goals.
What is Term Life Insurance?
Term life insurance pays a death benefit up to a specified amount if death occurs within the policy term i.e., 30 years).
Level Term vs. Decreasing Term
There are two main types of term insurance: level term and decreasing term. Level term means the death benefit does not change during the policy period. Decreasing term means the death benefit decreases as the policy approaches the term limit, usually in one-year increments. Level term is more common, making up more than 90 percent of the term policies purchased.
When comparing term life insurance policy types, try to decide which is better for your family, and remember your goal: purchase as much coverage as your budget allows. A level term policy has the advantage of a larger benefit. However, a decreasing term policy may offer the premium savings you need to purchase a policy. Remember, a decreasing term policy is better than no policy at all.
Is the Policy “Renewable?”
As we get older invariably our health deteriorates. A term policy that is “renewable” will stay in force after the initial term expires. This renewal usually will result in a higher premium. However, the advantage to the policyholder is that the same policy may not be available in the future due to advanced age and/or declining health.
Does the Premium Age With You or Stay the Same?
Some term policies will charge the same premium throughout the term. Others may increase the premium annually. Some policies may not raise the premium for a specified period of time and then do so annually. When comparing term life insurance, how the premium will change over time should be essential in deciding which policy you will buy.
Is the Policy Convertible?
Some term policies are “convertible.” This means that the policyholder has the right to convert the term policy into a permanent type of life insurance i.e., whole, universal, etc.) without additional evidence of insurability. This is an important consideration, especially if you know you would like a permanent life insurance policy, but your current budget won’t allow you to get the one you want. Remember, some term life insurance now is better than no life insurance at all.
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