Term Life Insurance

Term life insurance provides protection for a specific period of time. Unlike permanent life insurance, which is meant for long-term goals, term was designed to meet short-term needs.

Term life insurance pays a benefit if you die during the specified term of the policy. Level term products are the most common plans purchased today and can be anywhere from 5 years to 30 years. The premium and death benefit are designed to stay level during the life of the policy and the premiums can be either guaranteed or not guaranteed.

There are several important features that most term policies have:

  • Affordability - these policies, at least initially, will be cheaper than permanent policies. 

  • Adjustable - term life insurance policies may have adjustable premiums. This means that the carrier may raise or lower premiums at some point specified in the policy based on projected changes of investment earnings, mortality experience, persistency, and expenses. However, premiums may never be raised above the maximum premiums stated in the policy.

  • Renewability - many carriers’ level term policies allow the policyholder to continue coverage past the original coverage period of the policy. Each time the policy is renewed, the premium increases to the amount for the then attained age of the insured. This right is usually offered for a specific period, which varies depending on the type of policy.
  • Conversion - policies may be convertible to age 75 in most states. Conversion allows the policyholder to exchange a life insurance policy for any permanent life insurance policy offered by the carrier (if allowed by that specific company) at any time while the policy is in force, subject to established policy minimums.

Guaranteed Premium Period
When purchasing a level term life insurance policy, be sure you pay attention to the guaranteed premium period. Once you have been approved and make your first payment, the insurance company must keep the policy in force as long as maintain your premiums. A policy will usually lapse after a 30-day grace period if there is no payment on your behalf; however, each carrier may differ so ask about your company’s procedures. Some term insurance policies can be renewed when you reach the end of a specific period, which can be from one to 30 years. The premium rate will increase at each renewal date and most policies require that evidence of insurability be furnished at renewal.

Deciding If It’s Right For You
Every type of insurance has advantages and disadvantages. Below are some things to consider while making your decision.

After you have purchased an insurance policy, keep in mind that you should have a "free-look" period (usually 10 days) after you receive the policy during which you can change your mind if you decide you have made a mistake.

If you decide to purchase the policy, find out when the insurance becomes effective. This could be different from the date the company issues the policy.

Considerations For Term Insurance:

  • How long can I keep the policy for? Does it have a renewal option and what are the terms? 

  • When will my premiums increase – each year, or after a longer period of time?

  • Can I convert my term policy to a permanent policy? Some policies allow you to convert the policy to permanent insurance without a medical exam, regardless of your physical condition at the time of the conversion. These policies are known as "convertible term." 

Advantages

  • Initially, premiums are generally lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest. 

  • Term policies are effective for covering specific needs that are short-term, such as mortgages or car loans.

  • The newer 20 and 30 and year products can provide coverage as long as most people might want to carry life insurance.

Disadvantages

  • Premiums will increase with age, after the term selected expires, providing it is renewed past the original term. 

  • Coverage may terminate at the end of the term, or may simply be too costly to renew.

  • Generally speaking, the policy doesn't offer cash value or paid-up insurance.

Please contact us to get a quote or talk to us about term life insurance!

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