Term Life Insurance

What You Should Know About Term Life Insurance... Before AND After Getting A Policy!

Term life insurance is also sometimes referred to as 'temporary life insurance'. It is the cheapest life cover available and (in many ways) the least complicated. Term life coverage will protect your family for a set period of time. If you die within that time your dependants receive a payout. However, if you are still alive when the 'term' expires, all benefits fall away.

So what kind of 'temporary periods' are available for term life insurance? Typically, policies may last for 1, 5, 10, 15, or 20 years. This kind of life cover may also be put in place until the insured reaches a certain age - for example 65 or 90.

Depending on the type of term life insurance policy you choose, you might be able to renew it at the end of the term. However, if you choose to do so, your premium rates will usually increase. Some insurers will ask you to provide proof of your continued insurability if you want to obtain lower rates.

It may be possible to convert your term life insurance policy to a different type of policy if you so desire, such as a whole life, or permanent life insurance policy. If this is the case, you are often guaranteed acceptance despite any health problems. Having said this, your new policy is likely to feature very high premiums.

So why take out a term life insurance policy? What are the advantages? In general the premiums on this type of policy are likely to be lower than those of permanent cover. This means that while you are young and healthy you can buy better levels of coverage when you need it most.

Term life insurance may also be a good idea for protecting shorter-term investments such as mortgages or car loans.

The drawbacks of term life insurance are that your rates go up as you get older and may become impossible to maintain and afford. Your coverage ends at a specific time and you may not be eligible for renewal. There is usually no cash value or paid-up insurance facility on this kind of policy.

Three major types of term life insurance exist, namely level, decreasing, and increasing cover. Each of these options have benefits and drawbacks based on the amount insured, a decrease in the benefit as time goes by and/or increased premiums over time. If you are considering this kind of insurance, we suggest talking to your insurance broker about the type of coverage that will best suit your needs now and in the future.