What is Term Life Insurance?
Term life insurance is a type of life insurance policy that provides coverage for a specified period of time. Typically, these plans range from one to thirty years. Unlike permanent life insurance policies, such as whole life or universal life, term life insurance policies do not build cash value. These are designed to provide protection for a specific period of time. For example, during the years when children are growing up or while a mortgage is being paid off. Once the period of coverage ends, the policy can be renewed or converted to a permanent policy if desired, but the premiums will likely increase as the policyholder gets older.
Types of Term Life Insurance
- Level Term Life Insurance: This is the most common type policy. With a level term policy, the death benefit remains the same throughout the policy’s life. Premiums also remain the same, making it easier to budget for the policy.
- Decreasing Term Life Insurance: With a decreasing policy, the death benefit decreases over time. Use this type of policy to cover a specific debt or financial obligation, such as a mortgage or business loan. Premiums usually remain level.
- Renewable Term Life Insurance: Renewable policies allow you to renew your coverage at the end of the policy, without undergoing a new medical exam. Premiums for a renewed policy are typically higher than those for the original policy.
- Convertible Term Life Insurance: Convertible policies allow you to convert your plan to a permanent life insurance policy, such as whole life or universal life insurance. This can be useful if your life insurance needs change over time.
- Return of Premium Term Life Insurance: With a return of premium policy, if you outlive the policy’s , you will receive a refund of the premiums you paid over the term of the policy. Premiums for this type of policy are typically higher than for a standard level policy.
What are the benefits of purchasing this coverage?
Term life insurance can provide several benefits to you and your loved ones. Here are some of the key benefits of buying term life insurance:
- Affordability: generally more affordable than other types of life insurance such as whole life or universal life insurance.
- Flexibility: usually flexible in terms of coverage amount and duration. You can choose the coverage amount and length of the policy that best fits your needs.
- Simplicity: simple and straightforward. They provide pure life insurance coverage without any added investment or savings components.
- Peace of mind: Having term life insurance can provide you and your loved ones with peace of mind knowing that in the event of your death, they will receive a lump-sum payment to help cover expenses such as funeral costs, outstanding debts, and ongoing living expenses.
- Financial security: The death benefit from term life insurance can help provide financial security to your loved ones and ensure they have the resources they need to maintain their lifestyle and achieve their long-term financial goals.
How much do these policies cost?
The cost of term life insurance can vary depending on several factors, such as:
- Age: Younger individuals typically pay less for these compared to older individuals.
- Gender: Females generally have lower premiums than males for term life insurance.
- Health: Individuals with pre-existing health conditions may have higher premiums or may be denied coverage altogether.
- Smoking status: Smokers generally have higher premiums than non-smokers.
- Coverage amount: The higher the coverage amount, the higher the premiums.
- Length of policy: Longer coverage periods typically have higher premiums than shorter coverage periods.
- Insurance company: Different insurance companies may offer different rates based on their underwriting criteria and pricing models.
On average, a healthy 30-year-old non-smoker can expect to pay around $20-$30 per month for a 20-year term life insurance policy. However, this is just an estimate and the actual cost can vary widely based on the factors mentioned above. Work with a broker at LMS to find the best policy at with the best rate.