Term life insurance, also known as short-term life or pure life insurance, offers protection by providing coverage if the covered person deceased during the specified set period. It typically comes with guaranteed premium that has lower rate compared to whole life insurance’s premium, which possibly available for ten times cheaper. It’s because the term life policies far lower risk to the insurance provider.
After the term of this specific type of insurance expires, you typically have three options: renewing to another term, switch to permanent coverage policy, or simply terminate the current policy. The main reason why people choose this insurance type is because it provides lower premium or because they only need temporary life protection policy, however, to renew or convert to whole life insurance, you usually have to deal with raised premium. It’s also important to note that the money won’t be returned to the insurance holder if the covered person still lives by the time of the expiration.
What Are The Advantages of Term Insurance?
If you are interested in getting term life insurance and currently wondering if it’s worth it, the list of the benefits below might help you to make decision:
- It is much more affordable
The term life insurance policy is usually set for specified term, mostly 10-20 years. If it were compared to policy of whole life insurance with similar coverage amount, you’d find that it is far more inexpensive, which makes it ideal for first-time insurance customers to purchase. You can choose the term coverage length according to expected life changing events, such as until your children go to college or when your mortgage is paid off.
- It provides the privilege of conversion
Most term policies that you can review on instant term life insurance quotes allow you to convert short-term coverage into the longer whole insurance without further hassles. This ability is typically provided on the early years of the policy. In case currently your budget doesn’t permit you to select permanent insurance, then you can always switch to it later by using the privilege of conversion.
- It offers customizing options
By choosing the term life policy, you are being protected now by the insurance, but also possibly when you need to change the coverage due to changes in life. Amending the term or adding benefits to your policy to gain extra coverage is usually referred as “rider”. For example, if you can’t afford permanent plan that costs $100,000 of coverage, you may choose the $50,000 plan and maybe add $50,000 term rider in the future.
Note that it is possible to gain your desired amount of coverage with potentially less cost by mixing both term and whole life insurances. If at some point in the future your budget allows you to do more, you can always switch to permanent insurance.
What Are The Common Policy Types of Term Insurance?
Here are several types of term life insurance you can choose based on your personal circumstances:
- Yearly Renewable Term Policies
Also typically referred by its short, YRT, these policies doesn’t have determined term, but they allow the customers to renew every year–hence the name–without insurability evidence requirement, such as term life insurance no medical exam feature. The premium increases as the time goes by and the insured person gets older. This is the reason why it doesn’t make an appealing choice for many people.
- Level Term Policies
These policies offer coverage for around 10-30 years of timeframe. They usually provide both fixed premium and death benefit. However, it mostly requires higher premium than the yearly renewable term insurance because of potentially increasing insurance costs over the policy’s life span.
- Decreasing Term Policies
If you choose these policies, then the amount of death benefit will decline every year, based on the agreed schedule. You will have to pay the same amount of premium as long as the policy applies. It is often selected by people who also take mortgage, so the coverage is matched with decreasing home loan’s principal.
Prior to deciding if term life insurance is the right type of insurance for you, you need to determine first what do you need and what do you want from the insurance. In order to choose the best-suited term policy for you, work closely with your chosen insurance agent to comprehend all the features offered by the insurance. After you have made your choice, don’t forget to do thorough research of the company and the policies to get the best possible deal.
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