What Is Term Life Insurance?
Term life insurance is the most basic and most affordable type of life insurance and is best suited for people in their 20s or 30s with a limited income. Known as "pure insurance," term life insurance only covers death benefits. This is because term life insurance strictly covers death benefits and only covers the insured during the term of the policy. Once the term is completed, the benefits are no longer available. These terms are offered in various yearly increments including five-year terms, as well as ten, twenty, and even thirty year periods.If you are thinking of carrying life insurance for the protection of your family, carefully consider the options available. Traditionally, carrying two or three times the amount of your yearly salary of life insurance has been sufficient. However, many experts now consider this amount insufficient. Many claim that as much as ten times the amount of your annual salary is necessary to provide sufficient financial stability. Contact a life insurance professional before deciding upon a life insurance policy. Make sure to discuss the benefits and limitations of both term life insurance as well as traditional whole life insurance plans. Choose the best plan within your budget to help protect your family against the financial burden of unforeseen death.
Benefits of term life insurance
There are many benefits in choosing term life insurance over a traditional life insurance policy. Some of these benefits include:
- Affordability: Compared with other types of life insurance, term life coverage is the most affordable. Consider a reasonably healthy, non-smoking male in his forties. Traditional full term insurance on a $100,000 policy could cost as much as $2000 a year. However, with term life insurance, he would only be responsible for a yearly policy cost of around $200. However, as he gets older, he has to pay more for each extended period of his term life insurance.
- Conversion: With certain term life insurance plans, there is an option to convert your short-term policy into an extended permanent whole life insurance policy. This conversion allows term life insurance policyholders to increase their benefits without having to acquire a new insurance plan. However, converting term life insurance into whole life insurance comes with a cost. Once converted, policy holders can expect to pay a dramatically increased yearly premium
- Renewal options: For a vast amount of term life insurance plans, there are easy renewal options. Once the agreed upon length of the term life insurance plans expires, policyholders usually have the option of extending their term for another five or ten years. Some insurance carriers require a physical exam after the initial term expires. Of course, policyholders can expect an increase in their yearly premiums rates depending on their age.
- Financial protection: Once approved for a term life insurance plan, you must choose how to pay for it. Policyholders pay a premium that increases after each year of the policy. However, depending on certain variables including documented illness and asset accumulation, the policy terms change. However, term life insurance policyholders never pay more than an agreed upon maximum amount.
For those families living on a strict budget, term life insurance may be the only form of life insurance that is affordable. However, for those who have more financial flexibility, permanent life insurance might be the best option. For example, permanent life insurance allows policy holders to borrow against their policy as well as receiving a cash value payment of their policy should they choose to cancel their policy.
Term life insurance, on the other hand, does not allow policyholders to receive the cash value of their policies, and it does not allow them to borrow against their plans. Choose your life insurance policy wisely, and financially protect your family to the best of your ability.