Term Life Insurance
Term life insurance provides protection for a specified period of time, generally between 5 and 30 years. Level term life insurance is the most popular type of life insurance today. With this type of policy, the premiums and death benefits are designed to stay level throughout the duration of the term. These policies pay a death benefit if you die during the term for which the policy is specified.
Activating Term Life Insurance
Once you have been approved and paid the first premium for a term life insurance policy, the policy is active for as long as you continue to pay the premiums. There is no obligation to pay, but most term life insurance policies will lapse following a 30 day grace period after a premium payment has been missed. When the specified term is up, the policy is no longer active (death benefits will not be paid) and premium payments are no longer due.
Renewing Term Life Insurance
Some term life insurance policies can be renewed when you reach the end of a specific period, which can be from one to 30 years. The premium rates increase at each renewal date. Most policies require that evidence of insurability be furnished at renewal for you to qualify for the lowest available rates. Term life insurance policies can generally be converted to permanent plans at any time during the policy term, but will require paying additional premium.
Advantages of Term Life
Premiums for term life insurance are typically less expensive than premiums for permanent life insurance at the start. This makes term life insurance a more affordable and desirable option for younger people that may have mortgages, business loans, and other bills that take up a majority of monthly income. Term life insurance that extends for 20 or 30 years may also provide coverage for as long as is needed, in some cases.
Disadvantages of Term Life
Term life insurance may not be renewable or premium increases may make it difficult or impossible for policyholders to renew the policy, in some cases. Term life insurance policies generally don’t offer cash value or paid-up insurance. These disadvantages should be considered and policies should be thoroughly reviewed and understood before selecting a life insurance policy.
Choosing Term Life Insurance
Term life insurance is a good option for those that wish to protect themselves and their families, but do not have the funds available or wish to make the commitment that permanent life insurance requires. Before selecting a term life insurance policy, it is important to know how long the term will be, whether the policy is convertible, and whether the policy is renewable. Term life insurance is generally a better option for younger people that are in good health.
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