Term Life Insurance

Term life insurance is also known as temporary life insurance, because it provides coverage for a specified period of time. At the end of the coverage period, a term life insurance policy will expire if it is not renewed.

Unlike some other forms of life insurance, a term life insurance policy has no cash value. It only pays only if death occurs during the policy term. It has no other benefit provisions. Its sole purpose is to provide protection in the event of the death of the insured, and therefore term life insurance is considered a pure form of life insurance.

Term life insurance premiums are lowest when you are younger, but increase as you get older, based on expected mortality rates.

Five Things to Consider When Purchasing Term life Insurance

Before you purchase life insurance you should read the policy carefully so that you fully understand all benefits, costs and options that come with ownership. Below are some of the key things to consider when evaluating a policy:

1. Will the Face Amount Remain Constant or Will it Decline?

   The face amount is the amount of protection or death benefit payable under the policy. Depending on the type of policy, the face amount may remain constant or decline during the policy term.

   If the death benefit stays the same throughout the entire duration of the coverage period it is known as a level term policy. If the death benefit reduces each year during the coverage period it is called a decreasing term policy.

   Decreasing term policies are no longer very popular, and today the vast majority of new term life insurance policies issued are level term.

   Decreasing term policies are usually used for mortgage insurance. The face amount is intended to match the unpaid mortgage amount, so if the insured dies, the mortgage will be fully repaid.

2. What is the Policy Term?

   The policy term is the period of time during which the policy provides coverage. If the insured dies before the end of the coverage period, the face amount (death benefit) is paid to his or her beneficiary or estate. If the insured does not die during the policy term, they do not receive any benefit.

   The term can be for one or more years. The most common terms are 10, 15, 20 and 30 years. Because these periods are the most common, they tend to the most competitively priced. The most popular term is 20 years.

   It should be noted that not all life insurance companies will offer all of these terms. In addition, most companies will not sell a term insurance policy to an applicant if it extends beyond his or her 80th birthday. In these situations, the applicant will generally need to purchase a shorter term.

3. Can the Premium Change During the Policy Term?

   The policy premium is generally based on the insured person's age and health at the beginning of the coverage period and the premium will remain constant for the length of the policy term, irrespective of any deterioration in the health of the insured.

   However, for some policies the insurance company may not guarantee that the premiums will remain constant and therefore could seek to increase the premium at a future date. Before buying a policy, you should read the terms and conditions carefully to determine if premiums can be increased. Ideally you want to avoid any term life policy without a guaranteed fixed premium.

   If you purchase a renewable policy (see below) you should expect to pay a higher premium if you renew the policy at the end of the initial coverage period. The increase is due to the increased likelihood or mortality as you age.

4. Is the Policy Renewable?

   If a policy is renewable it means it can be renewed at the end of the initial policy term, at the option of the policy holder, for one or more additional terms, up to a specified age, even if the insured would normally be rejected for a new policy due to a deterioration in health or other factors since the policy was first issued.

   The insurance company guarantees it will issue a policy of equal (or lesser) amount irrespective of the insurability of the insured at the renewal date. The premium is simply set based on the age of the insured at the renewal date.

5. Is the Policy Convertible?

   Some term life policies are convertible. If a policy is convertible the policy owner has the right to change the policy into a permanent life insurance policy without providing additional evidence of insurability. Many people do not consider this option necessary, but if you think your personal financial situation may change, you may want to consider a convertible policy.

Term Life Insurance Quotes

So how much does term life insurance actually cost? It may be a lot less than you expect. Because the answer to that question depends on several different factors such as your age, height and weight, and the amount of coverage you want, the best way to find out is to obtain a term life insurance quote.

You can get a free term life insurance quotes right here. Simply complete our easy online form, starting with your zip code above, to get free quotes from multiple insurance companies with no obligation to purchase. Comparing quotes from different companies is the best way to find the right policy for your needs.

If you already have life insurance, obtaining term life insurance quotes is a great way to see if your current policy is still competitive, or if you could be saving money.

September 3, 2010