What is Term Life Insurance?
Term Life Insurance is a type of insurance that guarantees payment to a beneficiary or beneficiaries upon the death of the insured. The amount that the policy will pay a beneficiary depends on the “face value” of the policy (for example $100,000 of insurance). In addition, term life insurance policies are active for a specific period of time and, after that period of time expires, then you either need to get another term life policy or, if you are able to, you can convert the policy to a permanent life insurance policy (for example, Whole Life Insurance). Term Life Insurance is generally less expensive than permanent life policies and their premiums are dependent upon your age, health, and life expectancy.
Term Life Insurance applicants who want to enroll in a policy must go through medical underwriting. The process of underwriting begins with a personal obtaining a physical examination by a paramedic or by one’s primary care doctor. The results of this physical examination, which often includes bloodwork, are then sent to the insurance company for their evaluation, which helps them to determine an individual’s risk. When underwriting is complete, the insurance company will make an offer, which will include a premium for the policy that was decided by your age and your health rate class. Classes for health can include standard, standard plus, preferred, or preferred plus, with preferred plus being the best rating one can achieve, thus lowering premiums for the policy. If one is a smoker, then their rates are going to be higher than non-smoker rates. Therefore, medical underwriting plays a large role in deciding the cost of a term life insurance policy.
Term Life Insurance highly benefits people who are young or do not have severe medical conditions. Premiums are much lower at younger ages and someone, for example, in their young 20’s could get life insurance for $20 or $30 per month. Compared to a whole life policy, which could be hundreds of dollars per month even for a younger person, term life insurance would be the more cost efficient option for someone looking to get life insurance benefits for their family while not paying too much. In addition, term life insurance could be a good option for parents wishing to provide that benefit to their spouse or children in the event something happens to them. This policy then could be used as a means of income replacement.
Finding the Right Term Policy
Several insurance companies offer term life policies and each of them vary in some way in terms of their conversion privileges. While looking for term life policies, as a starting point, it is a good idea to think about how much life insurance you need. There are many different factors in deciding this amount for life insurance and everyone’s situation is different. We can help you to determine what amount of life insurance is right for you as well as what term would be most suitable. If you would like a quote on a life insurance product, please contact us and we’ll be happy to help!