What is Term Life Insurance?

Term life insurance means that the insurance is purchased for a certain number of years. If during that 10, 20 or 30 years the policy holder passes away, the beneficiary will receive the face value of the policy.

Term life is the original life insurance.

Term Life Insurance Premiums

Some studies suggest that only about one percent of term policies ever get paid out. That’s one reason why the insurance is so inexpensive. It’s a pure death benefit.

Unlike other life insurance forms the premium stays constant during the term and no cash value accrues. If the policy holder has maintained payments, the death benefit will be paid out.

Usage of Term Life Insurance

The primary use of this insurance is to ensure financial responsibilities are met for the insured. The idea is that by the time the term is up the insured will have amassed enough savings to protect the insured’s beneficiaries. Term life will not be necessary at that time.

Term Life Insurance Policy Types

Annual Renewable Term- This product is purchased and is in force for one year. It’s renewable each year thereafter. However, purchase of this type of term life is rare. That’s because anyone an insurer would accept for this type of term insurance, would be very unlikely to die within a year.

If someone fell ill during the term, the insurer would simply not renew for the next year.

An offshoot of this that is written is called the Annual Renewable Term (ART). In this form, the policy is paid for one year coverage. However, the policy is guaranteed to renew for a period of 10 to 30 years.

Unlike other term policies where the premium stays constant, the premium increases each year on this product.

Level Term Life Insurance- For a term of 10, 15, 20, or 30 years, this policy stays in force with the same premium. After the term expires, the insured usually has the option of extending the term with increasing premiums as they age.

Proof of Insurability

The older the insured gets, the more likely it is that proof of insurability may be required. If the health is questionable, any renewals may be denied.