Term Life Insurance
Term life insurance can be a great option for many stages of life. It is specifically popular with younger people who are just starting their families, new homeowners with a mortgage, or those who wish to provide funds to replace income for loved ones if they were to die.
Term Life Insurance
Term life insurance can be a great option for many stages of life. It is specifically popular with younger people who are just starting their families, new homeowners with a mortgage, or those who wish to provide funds to replace income for loved ones if they were to die.
What is Term Life Insurance?
Term life insurance provides life insurance coverage for a specific period of time. If you or your spouse passes away at any time during the term (usually 20–30 years), your beneficiaries (those you’ve selected to inherit your money) will receive a payout from the the life insurance policy.
Why buy Term Life Insurance?
Term life insurance is just like it sounds: it is life insurance for a set term. A term can range anywhere from 1 year up to 30 years, or sometimes even longer. On the death of the insured, as long as it falls within the term, it pays out the amount of the policy to the beneficiary.
Whole life insurance, however, takes everything you get with a term policy and attempts to add an investment component. Some of these investment components are simple money market funds that accrue interest, but others invest in bonds or seek to mimic indexes like the S&P 500. The policy builds a cash value in this investment component which you can borrow against or cash out after a certain time. The most common types of life policies that combine “other stuff” with life insurance are traditional whole life, universal life, and indexed universal life.
Whole life insurance is more expensive because you are not only paying for insurance, but you are also paying for investment . In almost every single scenario, the amount you pay into a whole life insurance policy will never equate to the benefit you receive. No matter how much the investment portion grows, the insurance company will still take their fees. As such, it is almost always better to keep life insurance as term insurance, and invest the other money in the stock market through retirement vehicles such as 401K or IRA.
What is Term Life Insurance?
Term life insurance provides life insurance coverage for a specific period of time. If you or your spouse passes away at any time during the term (usually 20–30 years), your beneficiaries (those you’ve selected to inherit your money) will receive a payout from the the life insurance policy.
Why buy Term Life Insurance?
Term life insurance is just like it sounds: it is life insurance for a set term. A term can range anywhere from 1 year up to 30 years, or sometimes even longer. On the death of the insured, as long as it falls within the term, it pays out the amount of the policy to the beneficiary.
Whole life insurance, however, takes everything you get with a term policy and attempts to add an investment component. Some of these investment components are simple money market funds that accrue interest, but others invest in bonds or seek to mimic indexes like the S&P 500. The policy builds a cash value in this investment component which you can borrow against or cash out after a certain time. The most common types of life policies that combine “other stuff” with life insurance are traditional whole life, universal life, and indexed universal life.
Whole life insurance is more expensive because you are not only paying for insurance, but you are also paying for investment . In almost every single scenario, the amount you pay into a whole life insurance policy will never equate to the benefit you receive. No matter how much the investment portion grows, the insurance company will still take their fees. As such, it is almost always better to keep life insurance as term insurance, and invest the other money in the stock market through retirement vehicles such as 401K or IRA.
Types of Term Life Insurance
1. Level Term
- Yearly- (or annually-) renewable term
- 5-year renewable term
- 10-year term
- 15-year term
- 20-year term
- 25-year term
- 30-year term
- Term to a specified age (usually 65)
2. Renewable term policies
Yearly renewable term, once popular, is no longer a top seller. The most popular type is now 20-year term. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.
If a policy is “renewable,” that means it continues in force for an additional term or terms, up to a specified age, even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy.
Generally, the premium for the policy is based on the insured person’s age and health at the policy’s start, and the premium remains the same (level) for the length of the term. So, premiums for 5-year renewable term can be level for 5 years, then to a new rate reflecting the new age of the insured, and so on every five years. Some longer term policies will guarantee that the premium will not increase during the term; others don’t make that guarantee, enabling the insurance company to raise the rate during the policy’s term.
Generally, the premium for the policy is based on the insured person’s age and health at the policy’s start, and the premium remains the same (level) for the length of the term. So, premiums for 5-year renewable term can be level for 5 years, then to a new rate reflecting the new age of the insured, and so on every five years. Some longer term policies will guarantee that the premium will not increase during the term; others don’t make that guarantee, enabling the insurance company to raise the rate during the policy’s term.
3. Return of premium
In most types of term insurance, including homeowners and auto insurance, if you haven’t had a claim under the policy by the time it expires, you get no refund of the premium. Your premium bought the protection that you had but didn’t need, and you’ve received fair value. Some term life insurance consumers have been unhappy at this outcome, so some insurers have created term life with a “return of premium” feature. The premiums for the insurance with this feature are often significantly higher than for policies without it, and they generally require that you keep the policy in force to its term or else you forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit), and others will return both.
Term Life Insurance Carriers
Term Life Insurance Carrier Partners
