What Is Term Life Insurance?

Term life insurance is commonly known as an inexpensive and basic coverage. It is also a type of insurance that is easy to understand. Simply put, Term Life Insurance is a life insurance policy that pays a benefit in the event of the death of the insured during a specified time period.

Term life insurance gives you all the coverage you need and none that you do not. That is why it is usually the best choice for almost everyone. This policy type is effective for a specified or designated period of time. That length of time designated for the policy to be in effect can be one year, 10 years, 20 years, or even up to 30 years. You should choose the policy with the term length that corresponds best to the length of time that you need coverage. If you should die during the designated term, your beneficiaries get a payout known as the death benefit. If you die after the term expires, there is no payout. Term policies usually have specified maximum issue ages. This maximum age of allowed issuance will vary from company to company.

Types of Term Life Insurance

There are two forms of Term life insurance. There is an Annual Renewable Term Life insurance policy which gives you one year of coverage at a time. You may renew the coverage annually. There is also a Level Premium Term Life insurance policy which you buy for a specific multiyear period such as 5, 10, 20 or even 30 years.

Annual Renewable Term

Annual renewable term usually has the lowest annual premium to start the policy but the premium increases as the named insured ages. If your primary concern is keeping down your initial costs, say for instance because you expect your earnings to rise greatly in the future, then consider purchasing an annual renewable term life insurance policy.

Level Premium Term

Level premium term allows you to lock in the premium for the prescribed period. Annual premium for the policy is guaranteed never to change, from the first year to the last year. This type of term insurance policy can be a good way to keep you from experiencing any premium increases. It is like the peace of mind you get from a fixed rate mortgage versus an adjustable rate mortgage.

A term life insurance policy is often times the most affordable coverage because it provides protection for a specified number of years. You may want to purchase a term life insurance policy to:

  • Receive valuable coverage at an affordable cost
  • Help cover specific financial responsibilities such as a mortgage or college expenses
  • Supplement a permanent policy or a work policy

Talk with one of our experienced professional Insurance Direct 123 agents to see which type of term insurance will work best for you.