What exactly is Term Life Insurance? Think of it as renting your insurance. Term Life Insurance provides life insurance for a limited period of time. It is for a specific term or specific number of years. If the insured dies within that period, the beneficiary receives the death benefit.
However, if the insured survives the specified term of the policy, the policy simply ends and no death benefit is paid.
Term Life Insurance generally offers the largest protection for your premium dollar. The reason is that Term Life Insurance policies do not build up any cash value. Most Term policies are “level term” policies, which mean that the death benefit and premium remain the same for the entire length of the contract.
Important Considerations as You Review Your Options
A couple of important factors to consider when researching Term Life Insurance policies are renewability and convertibility.
• Almost all Term Life Insurance policies contain the option of renewability. At the end of the term, the policy can be renewed for a limited number of additional years without a medical exam.
• The premium will normally increase with each renewal.
• Renewal rates may become quite expensive.
• Renewability may be an important factor to an insured person who has recently had a serious decline in health.
• This is simply the option to convert a Term Life Insurance policy into a Permanent Life Insurance policy without evidence of insurability, which means no new medical exam.
• Most commonly, convertibility is allowed on an “attained age”” basis, which allows you to purchase a new Permanent Life Insurance policy at the premium rate of your current age.
• You may be able to convert all or just a portion of Term Life Insurance policy before the end of the term period.
• The benefit of the convertibility option is that you can get a larger life insurance amount when you are younger and have a greater need for life insurance and can then convert some of that to Permanent Life Insurance to provide for final expenses or estate taxes.
Helping You Make Sense of Term Life Insurance
Imagine Insurance Advisors can help you determine if Term Life Insurance is right for you and help you decide how much you need given your personal situation. Call us today to schedule your no obligation appointment and review.