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FAQs:
By Mike Heuer

What is Term Life Insurance?

A term life insurance policy is one that provides a death benefit for a predetermined time, usually between 10 years and 30 years, and then expires if the named insured outlives the term.

Do I need to undergo a Medical Exam?

No medical exams are necessary to buy term life insurance.

What is the Death Benefit?

A death benefit is the amount of money an insurer will pay if the named insured dies while the policy is in effect. The payment usually is made in a lump sum but might have options for periodic payments if chosen by the policyholder.

Can the Death Benefit Be Taxed?

Death benefits are not taxed.

When might a Death Benefit Not be Paid?

A death benefit will not be paid if the named insured commits suicide immediately after the policy is drawn or up to two or three years afterward as the death would be considered an intentional act. After the policy has been in effect for a period of time, even a suicide likely would result in a death benefit being paid.

How are Term Life Premiums determined?

Premiums are determined by the age of the named insured, his or her general health, whether or not tobacco products are used and mortality tables, which enable insurers to determine the odds of someone dying while the policy is in force.

How long does Term Life Insurance last?

Term life insurance is in effect for a set number of years and then expires. If a 30-year term life plan has been purchased, coverage will be provided for 30 years and then end if the named insured outlives the term.

How is it different from Whole Life Insurance?

Term life insurance provides a death benefit only if the named insured dies during the term and does not grow cash value. A whole life insurance policy almost always pays a death benefit, which is provided by the premiums paid by the policyholder until the cash value is equal to the death benefit, at which time the policy has “matured” and no more premiums are needed.

What is a Level Term Life policy?

A level term life policy is one in which the death benefit and monthly premiums never change during the life of the contract.

What is a Decreasing Term Life policy?

A decreasing term life policy has a decreasing death benefit as well as monthly premium to reflect a decreased need for coverage, such as would occur as a home mortgage is paid down over a number of years.

What is an Annual Renewable Term Life policy?

An annual renewable term life plan is one that can be renewed each year for a likely higher premium amount.

What is a Return of Premium Term Life Policy?

A return of premium term life policy is one in which most of the premiums paid are returned to the policyholder if the named insured outlives the term for which coverage is provided.

What is a Convertible Term Life policy?

A convertible term life policy is one that can be converted into a while life insurance policy either during the term or soon after it expires.

Who is the Named Insured?

The named insured is the person whose life is covered by the term life plan.

Who is the Policyholder?

The policyholder is the person who takes out the term life plan and pays the premiums. The policyholder might be the same person whose life is insured.

Who is the Beneficiary?

The beneficiary is one or more persons to whom the death benefit would be paid if the named insured dies while the plan is in force.

Can I change the Beneficiary?

The beneficiary can be changed by the policyholder, as might happen in the event of a new child being born or a divorce occurring.

What are my options for Paying the Premium?

Premiums usually are paid monthly, but they also could be paid in one lump sum, annually or several times per year other than each month, depending in options offered by the life insurer underwriting coverage.

Can my Term Life Policy be Cancelled?

A term life policy can be cancelled by the insurer if premiums are not paid, and the policyholder can request a term life plan be cancelled if the reasons for which coverage was underwritten might have changed, such as might happen after a divorce.