Term Life Insurance
Term life insurance also known as term assurance, is life insurance which provides coverage for a fixed rate of payments for a limited period of time. The downside is that upon expiration of the term, the cost of a replacement policy is typically out of reach due to the change in age and possible general health condition. The previous rate of premiums at renewal if a renewal option is available is no longer guaranteed and as the client you must either forgo coverage or potentially obtain further coverage with more expensive payments or restirctive conditions.
If the insured person dies during the term, the death benefit will be paid to the beneficiary or the estate of the insured if a beneficiary is not named.
Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
Term insurance premium is based on a person’s age health, and life expectancy as determined by the insurer. Premiums on a level term policy are level, meaning that they are the same through the entirety of the policy. When considering term insurance, you must review the actual risks you are looking to protect against or transfer and your ability to cover those risks in a time limited manner.
When considering Term Life Insurance your Age, Health, and Term dictate your costs. Generally speaking the younger you are the better when purchasing term insurance. If you are young and are generally healthy it is the best time to purchase the most amount of coverage you can afford. This is especially true if you are a young family or you have many debts. If you are middle aged you may pay more due to age but can still purchase up to 30 years of coverage normally before 55 years of age. If you are approaching 65 the cost of Term insurance for most carriers will be costly and other options may be availible.
It is best to buy as much coverage as you can afford to
maintain while younger for the longest duration possible.
When age and health is on your side, it is best to take full advantage and protect your family. There is a long held adage to buy term and invest the difference.
This debate falls to two things the value you perceive a term policy will provide or the performance a permanent policy that provides extensive benefits which could provide investment participation and interest.
- Low premium cost
- Typically higher death benefit amounts compared to premium cost.
- Premiums are not typically refundable without an additional policy rider.
- Policy is not permanent.
- Policy does not build cash value.