Term Life Insurance is Favored by Consumers
Term Life Insurance is most favored by consumers because . . .
- Provides insurance protection for a specific period of time, such as 10, 15, 20 or 30 years.
- If you die within the time the policy is in force, your beneficiaries receive the face amount of the policy tax-free.
- If you outlive your policy term, the insurance terminates and you must buy another policy if you still want to carry life insurance.
- You can buy term insurance that covers you until you reach a certain age, usually 65 or 70.
- Provides money for college and living expenses if you die before your kids are fully grown.
- Probably requires a medical exam before issuing a policy.
- Smokers will pay more for life insurance
- Costs more as you get older.
Other types of Term Life Insurance:
- You can lock in low premiums by buying for a “level premium” policy. That means for a specific time period, say 20 years, your premium rate stays the same.
- A less popular policy is “annual renewable term.” This gives you coverage for one year with the option of renewing it each year for a specified duration, such as 20 years. With this policy, your rates go up every year you renew and are calculated based on the probability of your dying within the next year.
- Return of premium term life insurance provides for beneficiaries, can be placed if you think you outlive the policy. If no death benefit has been paid by the end of your insurance term, you receive all your (usually higher) premiums back.
- Medical history issues can hamper obtaining coverage, therefore “simplified issue” or “guaranteed issue” or “quick issue” policies can be available. These policies require no medical exam, but you pay a much higher premium in exchange for the guaranteed coverage.
How long a term?
Think in terms of when big-ticket items might be paid off, the children graduate college, the mortgage is paid, is there a home equity loan, etc. Figuring out which term you should buy — 10 years, 20 years, 30 years or some other number — requires a major review of your debts, financial needs, dependents’ needs — and when all those might change.