27 Important Things to Know About Term Life Insurance

Here is a list of important Things to Know About Term Life Insurance:

Simplicity of Coverage

 

One of the most appealing aspects of term life insurance is its simplicity. 

Unlike whole life insurance, term life insurance provides coverage for a specific period, generally 10, 15, 20, 25, or 30 years. 

If the policyholder dies within this term, the death benefit is paid to the beneficiaries.

 

The Basics

 

Understanding the basics is essential. Term life only offers a death benefit; there's no cash value or investment component. 

This makes it more affordable but also means there's no payout at the end of the term if you outlive the policy.

 

Cost of Coverage

 

Cost is often a significant factor when choosing life insurance. 

Term life tends to be much more affordable than whole life insurance. 

According to a study by the Life Insurance Marketing and Research Association (LIMRA), the average annual premium for a 20-year, $500,000 term life insurance policy for a healthy 35-year-old is around $350. 

 

Duration of Coverage – Policy Term

 

Coverage duration is crucial. 

The term length should align with your financial responsibilities and life goals. 

For instance, if you have a 15-year mortgage, you might opt for a 15-year term policy to ensure your home is protected.

 

Fixed Premiums

 

Premiums are typically fixed for the term's duration. 

This means you’ll pay the same amount every year, making it easier to budget for. 

However, once the term ends, premiums can increase significantly if you choose to renew your coverage for a new policy term.

 

Types of Term Life Insurance

 

There are different types of term insurance. 

Level term life insurance provides a fixed death benefit and premium throughout the term. 

In contrast, decreasing term life insurance features a death benefit that decreases over time, often used for mortgage protection.

 

Underwriting Process

 

The underwriting process involves medical exams and health questionnaires to determine your premiums. 

Generally, the healthier you are, the lower your premiums will be. 

Some companies offer no medical exam policies, which can be more expensive.

 

Advantages of Term Life Insurance

 

One of the advantages of term life is its flexibility. 

You can often convert a term life policy to a whole life policy without undergoing a new medical exam, a feature known as a conversion option. 

Review the entire list of 27 important things to know about term life insurance.