From your mailbox to your television to your child’s take home school notices, someone is telling you that you need life insurance. Most often, the insurance being touted is term life insurance, one of the simplest forms of life insurance on the market. Term life insurance pays a death benefit to the person or persons identified as beneficiaries if the insured dies while the policy is in force.In order to maintain term life insurance, the policy holder must pay an annual premium, often payable in monthly installments. The premium amount is usually based upon the age, lifestyle and health status of the insured.
Some of the most frequent questions asked regarding term life insurance are:
- Is term life insurance necessary, and if so, how much coverage do I need?
- Are there special considerations?
- Should I insure myself, my spouse or my children?
Term life insurance is the simplest form of life insurance coverage. You pay premiums to an insurance company each month based on an annual premium. If the insured dies during that year, the insurance company pays the beneficiaries a fixed amount as a death benefit. Term Life insurance coverage is not an investment vehicle. It will not pay dividends. It cannot be cashed in at the end of the term. The only purpose is to pay a cash benefit to survivors if the insured person dies during the term that the policy is in force.
Generally, the insurance company determines the premium based on the age of the insured and the face value of the insurance policy (the amount of money the insurance company will pay upon the death of the insured). Since the chances that the policy holder will die increases as they advance in age, the older the insured is, the higher the premium will be. Occasionally there are conditions that may increase the or perhaps even lower the premiums. For instance, many insurers will reduce the life insurance premium if the insured is not a smoker.
There are basically 2 types of term life insurance differentiated by the way the premium is paid. With standard term life insurance, premium payments will increase each year or at the beginning of each term renewal. Standard term life insurance is often the most affordable form of insurance for a young person, but can be prohibitively expensive as they get older. In level term life insurance, the premium is guaranteed to remain the same over the life of the term, regardless of changes in health or age. Often, level term life insurance is taken out for periods of five, ten or fifteen years, and is renewable for one, two or three terms. It is more expensive at the outset, but comparatively less expensive in toward the end of the policy term, since the premium is guaranteed not to increase.
Anyone with long term debt should consider term life insurance, particularly if their death will cause a financial hardship for those left behind. This is the only way to guarantee that their financial needs will be met. Get a free quote for term life insurance today to compare rates from several carriers.