The Basics of Term Life Insurance

Term life insurance is a type of life insurance cover that is provided for a specific period of time and the payments are fixed at a certain rate. Coverage expires after this period and if you still need more cover, you can renew your policy with new terms and conditions. If you are looking for the cheapest way to buy a death benefit then you may need to purchase term insurance. In the event that you die during the term of the policy, the insurance company will pay the death benefits to the beneficiary.

Why Term Insurance?

Many people purchase term life insurance in order to cover their financial responsibilities when they are gone. This could be anything from education for your dependents to mortgages and funeral costs. You will find that a lot of people would choose term insurance over permanent life insurance because term life is one of the cheapest life insurance coverage you can get on the market. Financial experts and insurance advisors recommend this type of insurance as a way to cover unexpected expenses until such a point the insured has accumulated enough savings.

Types of term insurance policies

The Annual Renewable Term Policy

As the name suggest, this form of insurance runs for a period of one year. This means that the insurance company will pay the named beneficiaries only if the insured dies within that insurance period. Premiums are calculated based on the probability of the policyholder dying within the twelve months.

Level Term Life Insurance

With this type of term insurance, the premiums are guaranteed to be fixed and not change for a certain period of time. The insurance term can be 10 years, 15 years, 20 years or 30 years. The premium amount that you pay each year is the same until the end of the insurance contract. Most level term life insurance policies will give you an option to renew your policy although it is advisable to always check this with your insurance company first. Level term insurance policies are the most common types of term life insurance.

Decreasing Term Life Insurance

The death benefit will decrease over time although the premiums will not change throughout the insurance term. This is usually taken by individuals who anticipate their insurance needs to decrease over time. In some cases it could be because they want to cover a mortgage loan. As your children grow older you will realize that their need for insurance will also diminish, a decreasing term life insurance policy would be appropriate in such cases.

Converting your Term Policy to a Whole Life policy

If you buy a term insurance policy you will usually be given the option to covert your policy to a whole life policy. This usually happens when the insured is diagnosed with an illness that may make it difficult for them to renew their term policy. This option however will only be extended up to a certain age or a certain number of years.

Online Life Insurance

Purchasing term life insurance is easy; you can buy it online from any location. In order to get the most affordable life insurance cover, it is important to make sure that you compare your term life insurance quotes.