Life Insurance

Term Life Insurance

Term life insurance is a form of life insurance that provides a death benefit for a specified number of years. The insurance company agrees to provide insurance on the life of the policyholder and to pay a death benefit equal to the policy's face amount if the beneficiary provides proof that the insured died while the policy was in force. If the insured is still alive at the end of the term period, the policy expires with no value (except if a "return of premium" rider was attached to the policy, then the sum of premiums remitted is paid out as a benefit).

Most term life insurance policies currently on the market have level premiums guaranteed for the full term of coverage. A ten year term policy provides coverage for a maximum of ten years, with the exact same premium due in each of the ten years. While the insured can terminate the policy at any time, the insurer is bound by the contract to keep coverage in place for the full duration of the term period as long as premiums are remitted when due.

It is important to note that most term life insurance policies sold ultimately terminate while the insured is living. Because most policyholders do end up outliving the term period or otherwise lapsing coverage, insurance carriers can charge much lower premiums compared to permanent coverage such as whole life insurance. A lower premium is desirable to the term life insurance customer, who generally is seeking the maximum death benefit protection that can be afforded over the selected coverage period.

Because mortality increases with advancing age, and term life policies have a level premium over the selected term period, a shorter policy always carries a lower premium compared to a longer term policy from the same company. For instance, a 10 year term policy always costs less than a 20 year term policy with a similar face amount and from the same carrier.

As a general rule of thumb, for a middle-age applicant a 20 year term life insurance policy has annual premium about twice that of a 10 year term policy with similar face amount. A 30 year term life policy may be double again, and a permanent life insurance policy could have annual target premium costs that are double the 30 year term policy's annual premium.

Convertible term life insurance policies contain a provision that allows the policyholder to convert the term insurance to permanent coverage at any time during the policy's term. The insured does not need to demonstrate insurability; rather the new policy assumes the health rating class of the old policy and is priced as if it were a new policy taken by an insured at the age of conversion. There is generally little or no credit given for premiums paid to date.

Term life insurance is the ideal solution when a need for life insurance exists for a fixed period of time. The typical case is a family with young children who would need guaranteed income replacement if the primary and/or secondary wage earner were to pass away before the children are grown up and no longer dependents.

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• Term Life Insurance
• Whole Life Insurance
• Universal Life Insurance
• Accelerated Death Benefits and Viatical Settlements
• Life Insurance/Long Term Care Combination Policies