Term Life Insurance
By Mike Heuer
Term Life was the first kind of life insurance ever offered and is the purest form as well as the most affordable. For only a few dollars per month, people can get up to $500,000 in coverage that can remain in force for up to 30 years and sometimes more. Rates for such policies are at their lowest level in decades, and that means it is one of the best bargains in the insurance world. Because they do not build cash value over time and only about 1 percent of policies result in a payout to a beneficiary, premiums are much, much lower than those for whole life products.
The life insurance plans can help protect family homes, college tuitions, business interests and more. Most people use them for their short- to mid-term financial obligations and have no use for the policies afterward, which is a big reason why the vast majority of them do not result in a payout to the beneficiary. Terms generally run from five years to up to 30 and cost much less than whole life insurance products with similar coverage limits. And the policies many times do not require a health exam to purchase. That makes them an easy way to get quality coverage for most people at very low rates.
There are many kinds of policies from which to choose. A level term life policy has a premium amount that never changes from the first month it is in force until the last. Coverage remains the same unless a change is requested by the policyholder, and the premium only rises if the insured amount does first. People can ask for a greater level of coverage with a corresponding rise in premium costs, but those increases in monthly payments generally are very small. And there is no health assessment needed to boost coverage amounts.
Another kind of policy is a decreasing term life plan, which is used to help ensure a home mortgage or other financial obligation that decreases over time can be paid off if the named insured should die. Because the amount owed decreases over time, there is no need to maintain a higher coverage amount. So a decreasing term plan will have a correspondingly lower coverage amount as well as premium, making them highly cost-effective for consumers.
For those who have life insurance provided through work, they are covered by an annual renewable term policy. Such plans, as their name implies, are renewed each year, sometimes at a higher rate, sometimes at a lower rate and sometimes for the same amount. Some individuals also obtain annual renewable policies, but the danger of doing that is if diagnosed with a terminal illness and the policy expires, the insurer likely will not renew the plan after declaring the named insured to be uninsurable.
Another policy type is a return premium term life plan, which charges higher rates but returns most of them if the named insured outlives the policy term. The only costs of such policies are those deducted for fees and other costs for maintaining the plans, and excess premiums are refunded to the policyholder.
No matter which type of coverage is needed, this site and its free online quote tool enables you to get multiple estimates on quality policies from the best insurers in the United States. Only those insurance companies licensed by your respective state insurance officials will respond with their best deals on their best life insurance plans. Once you have those estimates, you can compare rates and learn more about the insurance companies offering coverage while saving a bundle on your insurance needs.
Because they are in force for a specific number of years and then expire, policies are much more affordable and easier to buy than whole life plans, mostly due to the fact that most do not result in a death benefit being paid. Term life plans also do not build a cash value, unlike their whole life counterparts. And because they don’t, there is no need to pay higher premiums to ensure the policy will mature at a later date. Instead, they are in force for a predetermined number of years and then expire. That makes them a great deal for you as well as the insurance companies providing coverage.
Because so much money can be saved on premiums when compared to the cost of whole life policies, many investment professionals recommend buying term policies and using the difference in cost to invest in other vehicles that could result in higher gains over time, such as buying shares in a reputable company with a high potential for growth. And if the named insured should die while the policy is in force, a large payout will be made to the beneficiary and most likely with no federal and possibly no state taxes deducted.
Many term policies can be converted to whole life insurance if the decision is made to change to a plan that lasts a lifetime and builds cash value until reaching a maturity date. A maturity date is when the cash value of a whole life insurance policy equals its face value of coverage. And that is why the insurance is the purest form of life insurance around and was the first type ever created. It simply provides protection at a much lower rate for a set number of years and then expires unless renewed for a new term. But if you want to convert an existing policy to whole life insurance, the whole life rates will be higher than if you had bought whole life insurance from the outset due to term plans not building cash value.