Term Life Insurance

WHAT IS TERM LIFE COVERAGE?

Affordable Protection with Conversion Options

Very few people like to think about what their family would do if the worst should happen, but it is an important topic to contemplate as part of a sound financial plan. Term life insurance is generally the most affordable way to provide protection for loved ones if the need for life insurance will only last for a certain period, period such as twenty years.  This timeframe often coincides with a mortgage payment, how long until a child’s college funding needs last, or how long a person is providing for their spouse with their income.

The loss of income and household contributions can be a worry for many families. Everyday expenses like housing, utilities, food, childcare, education, and health care may be difficult to pay with a reduced household income. Life insurance death benefit proceeds can be set aside to pay for these ongoing expenses.

ADVANTAGES
  • Affordability – Least Expensive Insurance
  • Simplicity – Straightforward Coverage
  • Flexibility – Term Lengths of 1-30 years
  • Convertibility – Ability to Switch to Permanent
GREAT FOR
  • Replacing Income
  • Paying Off Mortgage
  • Ensuring Children’s College
  • Paying for Final Expenses

VARIATIONS, TYPES, AND OPTIONS

Guaranteed Level Term

GUARANTEED LEVEL TERM

The most common type of term insurance. Also the simplest, with premiums that remain the same through the life of the policy. May or may not be renewable.

Annual Term Life Insurance

ANNUAL TERM

Often referred to as Annual Renewable Term (ART) because these policies are designed to renew at the the end of every year, though premiums usually increase.

Renewable Term Life Insurance

RENEWABLE TERM

Allows the insured to renew their policy with an identical one when the term has expired. Only change in premium based on age. Come in 1 and 5 year varieties.

No insurance medical exam required

SIMPLIFIED ISSUES

Big draw: no insurance medical exam required and only a few questions to answer. Still comes with a variety of terms, prices, and options. Premiums may or may not increase depending upon configuration.

Return of premium policy

RETURN OF PREMIUM POLICY

Provides the option to have your premiums returned at the end of your policy if you are still alive. Different configurations, but generally higher premiums.

Convertible to cash value

CONVERTIBLE TO CASH VALUE

Allows policy owner to convert policy to some form of cash value coverage. New premiums based on age at time of conversion. Various stipulations.

CHOOSING A TERM LIFE INSURANCE POLICY

When it comes to purchasing term life insurance it is important to understand the conversion privileges as well as the accelerated benefits built into different policies. For example, if someone takes out a twenty-year term and in the tenth year has a heart attack, stroke, or develops cancer; knowing what kind of permanent insurance the term policy can be converted to becomes extremely important. Some insurance companies intentionally design term life insurance policies to have terrible conversion options by only offering an overpriced permanent policy which limits their exposure to future adverse risk. This allows the insurance company to price the term policies a few dollars less than other carriers. It is extremely important to understand the conversion privileges inside the term contract taking out a policy.

Some insurance companies offer accelerated living benefits for terminal, chronic, and critical illness built into the policy. These benefits allow the policyholder to access death benefit if a triggering event occurs (life ending cancer, debilitation, or a serious heart attack or stroke).  The best companies offer these benefits while charging almost the exact same premium as another company does for a typical death only policy.  It is prudent to compare the benefits inside the term life insurance policy before making the decision to purchase life insurance. Furthermore, there is no penalty to cancel a term life insurance policy and switch to one with more benefits, although you have to make sure a better option is being offered by an insurance company before canceling the current policy.

Approval for life insurance with no medical exam

Multiple life insurance companies have rolled out accelerated underwriting programs where the application do not have to complete a medical exam in order to take out a life insurance policy. The insurance company gathers personal information from multiple sources and decides if they want to make an offer for life insurance without the proposed insured having to take a paramedical exam.  This eliminates the need for a blood test and other prerequisites.  Coverage limits for these types of policies are typically limited to death benefit amounts of 1,000,000 to age 50 and 500,000 to age 60. If someone does not want to go through the paramedical exam process, applying for life insurance with a company offering an accelerated underwriting program becomes a great option.