What Is Term Life Insurance?

Term life insurance is an advantageous option for those who need to safeguard families who have access to funds for payment on typical expenses when raising a family. Term life insurance provides a safety net for financial responsibilities, such as for a mortgage, a college education, or other familial obligations.

What Is Term Life Insurance?

Term life insurance is a contract between a policy holder and an insurance company that defines if the insured individual passes away within the time period of the policy, the insurer will pay a death benefit to the beneficiaries named on the policy.

If you consider term life insurance, you have two options for making the choice of term length and coverage amount.

How a Term Life Insurance Policy Works

Term insurance costs remain fixed yearly for a level level term, such as 10 or 20 years. Term period ends, policies can generally be renewed but at a higher cost each year.

The policy expires if the policy expires before the term is concluded. You get none of the premiums paid so far into the policy unless you purchased a return of premium life insurance policy.

Some people buy term life insurance for revenue replacement. They are looking for life insurance coverage that provides funds for a family members to pay for expenditures for a specific period if they are not here to perform work and make money. Term life might be ideal for you:

• Covering the rest of the loan, so another borrower doesn't take ownership of the property. 
• Covering the rest of the loans which might be passed on to a stranger. 
• Paying the remainder of the loan so another individual isn't in a position to take ownership of the house.

The policy-holder can select both the length of time and the coverage amount, including $500,000. 

If the insured person dies while the policy remains in force, the beneficiaries receive the policy's death benefit. If the insured person lives longer than the policy's term and fails to renew it, the coverage ends.

An option that you can convert the term life policy into a permanent life policy is a permanent or universal life insurance policy. To be sure this is suitable for your overall needs, you may want to verify your health.

Types of Term Life Insurance

Level term life insurance. A level-term life insurance policy maintains the same premiums and death benefit, throughout the term. Rates don't increase as you age, and death benefits remain the same even if you die in the first year or last year of the policy.

Annual renewable term life insurance. An annual renewable term policy s premiums gradually increase as the policy renews. This help guarantee you have coverage without the need to reapply every year. Someone looking for the fullest protection is often a good candidate for this type of policy. Nevertheless, short-term life insurance may be a much better option.

Decreasing term life insurance. A decreasing term life insurance policy's premiums remain constant over a period of time, but the benefit from your policy decreases over time. Mortgage term life insurance is a form of decreasing term life insurance. The premium in your policy is tied to the balance of your mortgage, and the beneficiary is your lender, not your family. A regular term life insurance policy is best because it allows your household to participate any benefits they receive.

Return of premium term life insurance. The return of premium term life policy promises to pay your money back if you outlive the term. You generally see, the refund feature makes it an expensive policy. Return of premium term life is available from companies including Cincinnati Life, State Farm Life and Vantis Life.

Factors That Could Affect Term Life Insurance Rates

Coverage of a term life insurance and the term duration will affect your premiums. Other factors in life insurance quotes include:

• Age
• Gender
• Height and weight
• Current and past health
• Family health history (parents and siblings)
• Nicotine and marijuana use
• History of substance abuse
• Driving record (especially DUIs and moving violations)
• Certain hobbies and activities (such as aviation, scuba diving and other risky hobbies)
• Criminal history
• Credit

What Happens if You Outlive a Term Life Policy?

If your initial policy term period expires (such as in 10, 20, or 30 years), you can renew your policy at a higher renewal rate each year. You will not receive any refunds for your premiums paid (unless you were purchasing return of premium term life insurance).

Before you renew, it is a good idea, if you are older and less healthy, to shop around for a better deal. Even if you're older and similar in health status, you could find a better policy deal.

Lots of people decide that life insurance is no longer necessary before the end of the term and stop making monthly payments. Before you operate this way, be certain that you actually need life insurance. If you terminate a policy and your life circumstances change, you might regret not continuing the policy.