Term life insurance is one of the simplest ways to live with the peace of mind that your heirs and loved ones will be financially protected in the worst case scenario. But how exactly does it work? What are the benefits? And how do you choose from the many different types of term life insurance? In this article we hope to answer all these questions and more so that you can make an educated decision about purchasing term life insurance. For a free, no obligation consultation call 844-528-8688 or enter your information in the quote tool on this page.
What is Term Life Insurance?
Like all life insurance plans, term life insurance pays a benefit to your designated beneficiaries (usually a spouse or dependents) upon your death. As the name implies, however, term life insurance only covers you for a certain period of time—generally 10, 20, or 30 years.
Once the specified term ends, you will either need to renew the plan (often at a higher premium), end your coverage, or convert your plan into permanent whole life insurance. Term life insurance is usually purchased solely for the purpose of replacing your income in the event of your death, and it is often preferable to whole life insurance because the premiums are more affordable.
Benefits of Term Life Insurance
Term life insurance is an ideal choice for many reasons. For starters, there are some who only need coverage for a short length of time because they have other savings plans in place. For example, imagine you are 45 years old and know that by the time you reach retirement you will have amassed savings enough to provide for your dependents.
You may choose a 20 year term life insurance plan for peace of mind while you are still working and then drop the plan once you reach retirement
Additionally, term life insurance is incredibly affordable. For young families especially, it provides the greatest financial protection for the lowest cost of pretty much any type of life insurance.
If you are young and healthy, you pose little risk to the insurance provider, so they can often offer you more than enough coverage to take care of your needs at very little in the way of monthly premiums.
How Much Does Term Life Insurance Cost?
Your term life insurance will incur a monthly charge, known as a premium. The exact amount of your premium depends on a variety of factors. For starters, the longer the term, the higher the premium. Additionally, the amount of coverage is going to affect your premiums. A death benefit of $250,000 is going to cost you less monthly than a benefit of $500,000.
Finally, your age, health status, and family history play a key role in determining your premium. For example, a 25 year old non-smoker with no family history of major diseases is going to have lower premiums than a 40 year old smoker with two parents who died of heart disease.
Like all forms of insurance, the cost depends on the amount of risk posed to the provider. And healthier people are less of a risk.
Types of Term Life Insurance
There are several different types of term life insurance that you can choose from:
- Annual renewal term (ART) policies are renewed every year, and the premiums typically increase as your age and health status make you more of a risk. Sometimes, these plans can be a gamble because a severe diagnosis (such as cancer) may leave you uninsurable for the next year. Other ART policies guarantee that this won’t occur, so it is important to know the nature of the plan you are signing up for.
- Level term life insurance is the most common type, and it covers you for a specified term of 10, 20, or 30 years. Your premium will not change throughout the term, so it is usually going to be higher than an ART policy.
- Return of premium policies will actually repay your premiums if you do not die during the term of your coverage. With most other policies, there is no payout at the end of your term. Of course, in order to afford this, the insurance provider is going to have to charge you a higher premium than other term life insurance plans. (If you are wondering how insurers make money on these, it’s because you are effectively providing them with an interest free loan for 10 to 30 years.)
- Decreasing term life insurance policies reduce the death benefit amount as you age. These can be an ideal option if you currently have a lot of financial responsibilities, but you know they will decrease over time. For example, if your children are now in college but you predict them to be financially independent in the next 15 years, you could save money without sacrificing peace of mind.
How to Get Term Life Insurance
When you are ready to apply for a term life insurance policy, you can start by using our instant quote form to find the lowest rates available to you. You’ll also need to provide information about your medical history and health status.
After applying, many insurers will require you to undergo a medical examination in order to verify that you meet their eligibility requirements. This may be done at home or in a doctor’s office, and it may require blood or urine samples.
If you are interested in avoiding all of this hassle, we can also help you find term life insurance without a medical exam. Many people prefer this route because it is not only less invasive, it also means they can get insured in a matter of days instead of weeks (or even months!).
If you do opt for the medical exam, your insurance underwriter will use the information gathered from this as well as the health questionnaire and a review of your medical history in order to determine your final eligibility, as well as your premium.
Get All Your Term Life Insurance Questions Answered
Still wondering which type of term life insurance is right for your? Not sure how much coverage you need or how long of a term to choose? Get in touch with LJM Life Insurance today. We are here to help you make purchasing life insurance as easy as possible, and all of our services are provided at no extra cost to you.So give us a call at 844-528-8688 and get all your questions answered