Term Life Insurance
Term life insurance
provides a low cost way to get maximum insurance protection for a
temporary period of time. Term insurance builds no cash value. It pays a
benefit only if you die during the term of the policy coverage. If death
occurs, the beneficiary collects the face amount (death benefit) of the
policy income tax free.
Many insurance
companies offer level premium term for a period of 5, 10, 15, 20 and now
even 30 years. Premium rates increase at the end of the guaranteed policy
period. These policies have become very popular because of their low cost
and the availability of a relatively long term of coverage. Policies
require that evidence of insurability be furnished at renewal to qualify
for these available rates. It is important to understand the terms of any
insurance policy that you are considering before making a purchase.
When is Term the right choice?
If the lowest dollar
outlay is your main concern, and your insurance need is for a period of 20
years or less, term may have an advantage. If your need for coverage will
last beyond 20 years, a low cost Universal Life or Whole Life policy may
be more effective. Should your life insurance needs change, many term
policies carry a conversion privilege that will allow you to covert your
term coverage to permanent Universal Life or a Whole Life policy without a
medical examination. It is important to check the conversion privileges of
the term policy before you make your purchase.
Term Insurance Advantages
- Initially,
premiums are generally lower than those for permanent insurance,
allowing you to buy higher levels of coverage at when the need for
protection often is greatest.
- It's
good for covering specific needs that will disappear in time, such as
mortgages or family income needs for children. Term insurance is an
effective way to get the most coverage at a low cost for up to 30
years.
Term Insurance Disadvantages
- On
most policies the premium may increase after the guarantee period
expires.
- Coverage
may terminate at the end of the policy term or may become too
expensive to continue.
- Generally,
the policy doesn't offer cash value or paid-up insurance.
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