Term Life Insurance
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When it comes to life insurance policies there are basically two types: permanent life insurance and term life insurance. Term life insurance is the type you most often see advertised on television and is by far the most common type of life insurance that is purchased.
Term life insurance is popular because rates for this coverage tend to be much lower than for permanent life insurance policies like whole life insurance or universal life insurance. Permanent life insurance policies quite honestly may have a lot of extra bells and whistles that you just flat out don’t need. Despite the attractive nature of term insurance, term life does have some downsides which need to be considered before purchasing a policy.
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The Definition of Term Life Insurance
Term life insurance is a product which pays a certain monetary benefit to the insured if his death occurs within a predetermined amount of time. The coverage usually remains in force only as long as the customer continues to pay premiums. Some term policies even limit the length of the term that can be obtained.
For example, you may see a commercial for a term life insurance policy which is only available to seniors over the age of 55. A policy of this nature is designed to last 10 to 20 years before the conditions of the policy are altered. In some cases, insurance companies promise not to alter the terms of the policy for as long as the policyholder remains alive. In other cases, that may not be so.
By contrast, the whole or universal life insurance policy receives payments from the customer throughout his lifetime, continuing to cover the individual regardless of how long he lives. Upon his death, whether at a young age or old, the value of the policy is paid to his beneficiary. These policies tend to be more expensive than term life insurance policies.
The Cost of Term Life Insurance
Term life insurance was the first type of life insurance policy available. Due to the nature of term life, insurance companies are able to assume risk based upon several factors including the customer’s:
- Life Expectancy
- Geographic Location
…and other lifestyle factors that contribute to overall health and well being.
Taking into consideration all of these factors, and then assessing the term of the policy, enables the insurance company to earn the maximum amount of profit before having to pay the death benefit. Such controls help the company keep the prices as low as possible.
The whole or universal life policy, on the other hand, is usually purchased when the customer is fairly young. He and the insurance company agree on the financial benefit to be paid out at the time of death. But since lifestyle changes affect the overall health and well-being of the customer throughout his lifetime, these policies present a higher risk to the insurance company, causing them to be more expensive.
There is also more risk to the policy holder of a whole life policy as the higher payments as seen as an investment. Typically, a higher rate of return is found through mutual funds or stocks. Some financial advisors caution people against using life insurance as an investment and recommend term life for this reason.
Searching for Term Life Insurance
Searching for the term life insurance policy that meets your needs is similar to searching for car insurance. There are a plethora of websites which compare various companies and their rates. You simply enter your zip code, then sit back and allow the website to gather quotes. Keep in mind that these quotes are ballpark figures.
As with any insurance product, it is important for you to understand what an individual policy provides. Comparisons must be made regarding:
- Length of term
- Rate increases
- Certain restrictions that may apply
- Total death benefit paid
- Whether or not premiums will be affected by changes in health
You might want to check with the company that carries your homeowners or auto insurance regarding term life insurance. In many cases, companies who offer life insurance in addition to what you already purchased from them may be willing to give you a multi-line discount in return for combining all your insurances with them. However, you may find that a company dedicated solely to term life insurance can provide better rates.
Purchasing term life insurance is one of the best ways to ensure that your family is not financially harmed upon your death. It’s something that needs to be considered by any individual who has a family to take care of. The cost of a funeral alone can be quite a financial burden on those you leave behind, not to mention having to replace income lost upon your death. These policies are often taken out just for the time period when you will have dependents at home.
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Consider getting a term life insurance policy today. They are inexpensive and usually well worth the cost. You can begin your search for the best term life insurance rates in your area by entering your zip code into our search tool below now!
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