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Term life insurance is basic life insurance that pays a death benefit to the beneficiaries when the insured dies, assuming the policy is in good standing at the time of death. It offers provisional protection, and because of that, term life differs from the other forms of life insurance, namely permanent products such as whole life, universal life, and variable universal life, etc.
How is Term Life Insurance Useful?
Term life insurance is useful for temporary life insurance protection or when current situations make permanent life insurance unaffordable. Generally term life insurance does not accumulate cash value and is usually purchased for a designated period of time such as 10, 20, 30 years etc.
What types of term life insurance are offered?
Annual Renewable and Convertible Term Life Insurance
Annual renewable and convertible term life insurance is renewable yearly and usually can be converted to a permanent product without proof of insurability up to a certain age. The disadvantage of annual renewable term, as well as some other types of term insurance is that the annual premium generally goes up each year as the insured ages. An analogy for this type of insurance would be to rent as opposed to purchasing a home.
Level Term Life Insurance
In level term insurance the annual premium stays level across a set number of policy years, often 5-, 10-, 20-, and 30-year periods.
Decreasing Term Life Insurance
Another common term of life insurance is decreasing term life. In this product the premiums or the death benefit typically decrease over time. It is useful to protect the balance of a loan whereby the death benefit decreases with the loan amount. A typical use for decreasing term life insurance would be to provide the means to pay off a home mortgage if a partner dies.
So What Should I Do?
While your insurance needs will be decided by your specific circumstances, it is possible you may want to consider term life insurance. The rate and accessibility of the form of insurance that is applicable to you depends on certain factors such as age, health, and the variety and quantity of insurance you need. If you are considering acquiring life insurance, seek a qualified professional to explore your options.
©Group Coverage, Inc 05/07
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