What exactly is term life insurance? There are many different forms of life insurance coverage, and term is one of the most popular.
In a nutshell, term coverage is exactly what it sounds like – a life insurance policy that provides coverage for a certain term, or time period. So term coverage is temporary protection because it lasts for a certain time period only.
This is why term policies are so affordable compared to permanent policies that last for a lifetime.
Learn more about how term life insurance coverage works or get a quote for term coverage now and compare rates from top carriers.
How Does a Term Life Insurance Policy Work?
When you purchase a term policy, the insurance company will provide a death benefit for a certain number of years. If you were to die within that time period, then the death benefit amount is paid to your beneficiaries. If you outlive the term, then the policy expires. You have two options at the end of the term. You can renew the policy for another term. If you do this then your rate will increase because the new policy rate will be based on your current age. Another thing you can do is to opt for permanent coverage.
How Many Years Should My Policy Last?
Once you decide that a term policy is the best choice for you, then you will need to determine which term length is right for your needs. Term policies can last anywhere from one year to 40 years. A one year policy, also known as annually renewable term, is obviously a very short-term policy. The coverage lasts for just one year, but can be renewed.
Most people want the peace of mind that comes with the financial protection of a longer term policy. Let’s say you buy a home and you now have a large mortgage balance that won’t be paid off for 30 years. You could get a 30 year term policy with a death benefit amount that equals your mortgage. This will ensure that if you died before the mortgage is paid in full, your term policy would pay off the balance so that your spouse or your children aren’t left with a hefty burden.
Another reason many shoppers choose a term policy is for income replacement. If you were 15 years from retirement then you could obtain a 15 year term policy to cover your salary for the next 15 years. So if you make $40,000 per year, then you might want to get a 15 year term policy with a death benefit of $600,000 (40,000 X 15). This would ensure that your family does not have to worry about a reduction in income to the household if you passed away.
How Much Does Will a Term Policy Cost Me?
The cost of a term policy is based on several variables – your age, the policy amount, the term length, your health history, driving history, and even your occupation or hobbies. Everyone has a different situation and a different need for coverage amount and the term length, so the only way to get accurate rates is to get a personal rate comparison. You can easily compare rates from several companies all in one place. This benefits you because every carrier has their own unique criteria so every carrier has different rates.