Term life policies provide coverage for specific periods of time, for example, 10 or 30 years. You select the amount of coverage you want, the length of time the policy needs to be in place, and in return for your premium payment, if you pass away during the ‘term’ of your policy, your beneficiary receives payment (the amount of coverage your selected).
The downside of Term Life Insurance is that once the term expires (for example, you purchase a 10-year term policy, and after 10 years, you’re still living), your coverage ends.
Is there an upside to this downside?
Yes. Because Term Life Insurance has a defined period of time for which the policy is in effect (in contrast to Whole Life Insurance, which never expires as long as you make your premium payments), it’s the least expensive option when it comes to life insurance.
While you usually can renew term life policies for one or more terms even if your health has changed, there's potentially a big risk here if you get sick during the term.
Tip. If your health does change, you probably won't be able to buy another term policy without seeing your premium skyrocket. You should ask your insurer or agent what the premium will be if you continue to renew the policy.
Note. You should also ask whether you will lose the right to renew the policy when you reach a certain age. Because this coverage is fairly cheap, it's often a good option for young people in good health who can't afford to buy "permanent" coverage (Whole Life Insurance).
Here are a couple of term life policy options:
- Yearly Renewable Term Life - This is coverage for a longer term, 10, 20 or 30 years. The longer term also means that the costs to cover you are spread out so that you will avoid the potential for huge annual premium increases.
- Convertible Term Life - This is yearly renewable with the option to convert to a permanent policy in the future. The coverage, which often has the lowest cost and highest death benefit options of term insurance, can be a good choice for younger people who can't afford permanent coverage but who need a large death benefit and the option to convert to a permanent policy down the road.
As with all life insurance policies, there are numerous options from selecting the right amount of coverage, the right type of policy to meet your needs, and ensuring it’s affordable. Working with a licensed insurance advisor can significantly reduce the confusion and headaches you might face trying to navigate the life insurance market on your own.
If you’d like to learn more, contact one of our Licensed Advisors or complete the form on this page. We’re here to help.
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