Term Life Insurance
Term Life Insurance
Term life insurance will pay the death benefit you purchased to your beneficiary if you pass away during the policy’s term that you have selected. Term insurance is easy to understand: choose a policy amount and number of years for coverage, and then you are ready to shop your policy.
Consumers usually choose policy terms that provide coverage for the years in which their family members most need financial support — usually while their kids are growing up and they’re paying on their mortgage and other debts. Typically you can choose terms of 5, 10, 15, 20, 25 or 30 years.
Term life insurance doesn’t have an investment component or cash value, as opposed to other life insurance products like whole life or universal life which covers you for your entire life. Since term doesn’t have cash value, you can’t borrow from a term life policy or cancel it and receive any cash value. If you quit paying your periodic premiums before the term ends, your policy will lapse and you will no longer be covered. Also, your policy will expire at the end of the term unless your company offers a renewal or you convert your policy to a permanent one.
There are several Types of Term Policies
Level-premium term life is the most popular kind of term life insurance. With level term, you pay the same premium every year and then your beneficiaries will receive the death benefit if you pass away while the policy is in force. According to the Insurance Information Institute, 20-year policies are the most popular length.
Annually renewable term life is just as the title implies: You can elect to renew the policy each year, but your premium will increase as you get older. Your policy will specify the expected increase for each renewal. Annual term is primarily for people who have a very short life insurance need. Normally, you will save on premiums by locking in a price with a level-term policy.
Decreasing term life policies have a death benefit that decreases over time but the premiums remain level. Some buy this type of policy if they want to cover a specified debt, like a mortgage.
Return of Premium term life provides for the insurer to refund all premiums paid to the company if the policyholder outlives the term of the policy. This product was designed for consumers who don’t like paying for life insurance that could expire without a payout. Because of the refund feature, return of premium term costs more than traditional level term insurance.
How Much does Term Insurance Cost?
As with any life insurance, the rates for term insurance are based on the applicant’s age, health, and amount of coverage. We have provided some actual rates in the chart below.
Here are the monthly rates for a 30-year old male and female non-smoker in good health:
As you can see by our rate chart listed above, a head of household can leave $1 million to surviving loved ones for a monthly payment that is less than dinner out for a family of four.
How Term Insurance can Benefit You and Your Family
Term life insurance is intended to cover your risk of dying during those years when your dependents still need your support. Since term life insurance is so inexpensive, you can easily cover your surviving loved ones for:
- Monthly living expenses for a certain number of years
- Pay off your mortgage so your family can remain in the paid-for home
- Pay off other personal debt like credit cards and car loans
- Invest in a college education fund
- Continue with retirement planning for your spouse
- Pay for final expenses like funeral and burial costs