Thinking about life insurance is a difficult task to do. And it can become more difficult if you hear about all these different types of life insurance and you’re not sure which one will be the best to choose. There are term life insurance, whole life insurance, universal life insurance and variable universal life insurance. In this article, you will read about all the information you need to know about term life insurance. By reading this, you will get a better understanding of what term life insurance entails and you can decide if this is a good option for you or if it is not exactly what you want.
What is term life insurance?
Term life insurance provides coverage for a fixed period. After that agreed upon period expires, the life insurance expires as well. If the insured person dies during this specified period, the life insurance policy will pay the beneficiary. If the insured person did not die during this period, they will not be covered anymore and have to purchase life insurance cover again, which will have different conditions and payments.
What makes it different from permanent life insurance?
Permanent life insurance such as whole life insurance, universal life insurance, and variable universal life insurance provides cover for the insured person for their entire lifetime unless the policy is allowed to lapse, with fixed premiums. Term life insurance only protects a certain amount of time, for example, 5, 10 or 20 years. It is also usually used for income replacement needs for individuals and not for estate planning needs or charitable giving strategies.
The advantages of term life insurance
- It is a lot cheaper than other types of life insurance. Because term life insurance offers protection for a fixed period of time, it is a lot cheaper. The chances are there that the policy may expire before death occurs and that is why the premiums are inexpensive.
- It is flexible. You have a lot of choices when getting term life insurance. With annual renewal term life you can get cover for as little as one year. You can also choose from policies which include 5, 10, 15, 20 and 30 years.
- Straightforward and easy to understand. There is nothing confusing about term life insurance which makes it easy to choose which one you need. You only have to consider three things when choosing the best one for you: The coverage amount. The length of term. And the company you decide to be covered by.
Types of term life insurance
- Level term life insurance provides coverage for a fixed amount of time which can be one, five, ten, twenty or thirty years. The premiums are calculated based on the age and health of the insured person.
- A yearly renewable term has no specified term and is renewable every year. The premiums start off small and increase each year. The premiums can be difficult to maintain after a lot of years because it increases every year.
How do the premiums work?
The premiums for term life insurance get determined by the age, sex, and health of the insured person which is based on a medical exam. It also includes factors such as driving record, medications, smoking status, occupation and family history. If you are young and healthy, the premiums will be less expensive.
Who is term life insurance good for?
It is suitable for young families. Because it is the least expensive type of life insurance, it is good for young families to use. Because young families often still struggle financially and cannot always afford the high premiums of permanent life insurance. Particularly one with a 20-year term is good to get upon having children. This is a good option just in case something happens to the primary earner while the children are still young.
It is also good to have for people who know for certain their need for life insurance coverage will be temporary. Individuals who feel their family won’t be in need of the protection of life insurance for a long time. If they have accumulated enough assets within a couple of years, then term life insurance is a good choice.
Wondering if you should get life insurance if you don’t have any dependents?
Term life insurance is a good option for people who don’t want to pay a premium for their entire life. It is best for people who only want protection for a couple of years in case something might happen. It is a secure insurance to understand, and there is nothing that makes it complicated. It is flexible, and you have a lot of options to choose from with the term you want to be insured and the coverage amount. The cover value is usually used for income replacement needs. Now you know all you need to know about term life insurance, and you can make an informed decision about which life insurance policy will be the best option to choose for your future.