Term life insurance is favored by a large portion of our population. Let us take a close look at this policy and see why. It may be wise to begin by attempting to define this type of policy. Let us see what it is all about.
Term life insurance is a type of policy that pays a predetermined amount of money upon the death of the person insured. The proceeds of the term policy can be paid either in one lump sum or in the form of a monthly income. The owner of the term policy may be the insured or someone else who has an insurable interest in the person being covered. A person has insurable interest if s/he would suffer monetary loss upon the the death of the insured.
A wife would have insurable interest in her husband. A husband would also have the same interest. A business would suffer loss upon the death of a key employee or a key shareholder.
The premiums on this type policy are very minimal compared to the amount of money that the life insurance company will pay out. Term policies are very inexpensive.
There are may types of term policies. Most have level heath benefits as well as level premiums. Some examples are the 5 year term, 10 year term, 15 year term, 20 year term, 25 year term and 30 year term policies. You may also purchase a decreasing term insurance. This type policy is usually used to pay of the balance of a mortgage upon the death of the homeowner. There is also another type of policy known as yearly renewable term or increasing premium term. This is really a one year policy with the option to renew each year at the true insurance cost of the attained age. The older you get the more it costs to renew.
It used to be when you were interested in purchasing term life insurance you would get an agent to come and see you, tell him or her what you have in mind and get a few illustrations showing the death benefits and the premium costs. If you like what you see you proceed from there. Today you can compare your premium quotes online after you give the companies an idea of what you plan. In some cases you can buy your policy right there and then and in other cases much of the underwriting is done online. Sometimes you still need to see an agent, if the policies are very large.
As mentioned before term insurance rates are very cheap. The shorter the period of coverage the less costly the policy is. For example, a 5 year policy will cost less per year than a 10 year policy. It costs more per year to buy coverage for 20 years than it would cost for a 15 year policy.
Permanent life insurance is sold more that term insurance. There are therefore very few life companies that sell only term policies. Most companies sell both types of insurance, term life insurance as well as permanent insurance.
Which policies would you use where? If you have a short term need for coverage you would use the shorter term policies like the 5 year and 10 year term policies. If you have long term needs like family protection or the funding of a buy sell agreement for you business you may want to use the longer term policies like the 20 year and 30 year term life insurance policies.