Term Life Insurance
Term life insurance is a way to provide a monetary award to your beneficiaries if you die during the life of your policy. In the beginning of the policy, term insurance will cost much less than permanent insurance, as it has no savings feature attached to the policy. However, the return rates on permanent insurance such as whole life are not especially high, and therefore it is widely recommended that you take the difference between the premium of term and permanent insurance and invest this in bonds, stocks, etc. so that you may achieve a higher rate of return. Because of the low initial premium of term life insurance, many experts believe that this is the best buy if you invest the money saved into something with a return rate.
Term life insurance awards your beneficiary a monetary sum should you die during the period of coverage. The period of the policy can be different increments, but usually must be at least one year in duration. Should you die during this period of insurance, the amount of the policy would be paid out to whomever you name as you beneficiary. However, should you not die, (a much more likely scenario) you get nothing and the term simply ends. There are no savings or investment features attached to term life insurance. Only if you die during the term of the insurance will any monetary sum be paid out.
You may hear on television commercials for life insurance that you need “no physical or checkup from the doctor.” If this is the case, then most likely the premium will be higher than you could get if you shopped around. Most policies require a checkup each time you wish to renew the policy. Some policies are also convertible, which means you can switch over to a form of permanent insurance without a physical. Your premium will grow increasingly more expensive as you grow older, since you then pose a greater risk to the insurance company.
If you do not want your payments to continually increase as you grow older, you can get decreasing term life insurance. This means that your premium will stay the same, but the amount paid out at your death continually decreases over time. After all, something’s got to give. The older you are, the more risk you are to the insurance company, and the more you will have to pay for the same amount of insurance.
One type of decreasing term insurance is credit life insurance. This is generally purchased in conjunction with a loan from the bank. If you die before paying off the loan, this policy pays off the loan.
Term life insurance is the most basic form of life insurance. It is also the cheapest. If you do not plan on needing a fixed income after retirement (say the age of 60), then term life insurance is probably right for you.
