TERM LIFE INSURANCE
FLEXIBLE COVERAGE WITH LOWER PREMIUMS
Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate. Term life premiums are based on a person’s age, health, and life expectancy. In some instances, a medical exam may be necessary. These policies have no value other than the guaranteed death benefit and feature no savings component as found in a whole life insurance product.
WHAT IS TERM LIFE?
HOW DOES TERM LIFE
When you buy a term life insurance policy, the insurance company determines the premiums based on the face amount of the policy, your age, your gender, and your current health. In some instances, a medical exam may be required. The insurance company may also inquire about your driving record, current medications, smoking status, occupation, hobbies, and family history.
If you die during the term of the policy, the insurer will pay the face value of the policy to your beneficiaries. This cash benefit is tax-free, to be used however your family chooses.
If the policy expires before your death, there is no payout, and you no longer have an insurance policy. However, you may be able to renew a term policy at its expiration. The new premiums will be based on your age at the time of renewal. Term life policies have no value other than the guaranteed death benefit.
Young people with children may obtain large amounts of coverage for reasonably low costs. Upon the death of a parent, the significant benefit can replace lost income.
These policies are also well suited for people who temporarily need specific amounts of life insurance. For example, policyholders may need a high amount of insurance until their children are out of college and the mortgage is paid in full. After 20 to 30 years, their survivors will no longer need extra financial protection.