Term Life Insurance. What
Is It All About?
by: Donald Lusan
What is term life insurance? You have an interest in buying term life
insurance, that is why you are reading this article, and you want to know
how it really works. Right? Well, there are many types of term life
insurance and I am going to give you a brief explanation as to how each
one works.
Decreasing Term Life Insurance
Decreasing term life insurance is very popular with home owners and
mortgage companies. The homeowners want to know that the mortgage is paid
off if they should prematurely die, and the mortgage company want to be
assured that they are repaid the money loaned to the homeowner. The face
amount of these policies decrease in a uniformed manner each year as the
balance owed on the mortgage decreases, and the premium remains level.
This is very inexpensive life insurance.
Increasing Premium Term Life Insurance
This is initially the cheapest term life insurance you can buy. The
death benefit remains level for the duration, however, the premiums
increase every year and as a result this may turn out to be the most
expensive term life insurance you can buy. If you should purchase this
policy it would be wise to convert to a level plan as quickly as possible.
5 Year Level Term Insurance
The face amount of this policy remains level for the entire 5 year
period and so does the premium. Upon death the face amount is paid either
in one lump sum or in the form of an income. If you have a short term need
for life insurance, like covering a bank loan, then this may be the plan
for you.
10 Year Term Life Insurance
Like the 5 year term life insurance policy, the ten year term life
policy can be used to cover a bank loan, but it can do considerably more.
It can be used for family protection and a myriad of other needs. The face
amount of the policy remains level for the duration and so does the
premium. Some companies allow you to continue the policy after 10 years
with an increase in premium.
20 Year Term Life Insurance
The 20 year term life insurance policy is probably the most popular of
term life policies. The death benefit remains level for the duration and
in some cases so does the premium. With some companies, however, the
premiums increase after the first 10 years to reflect the cost of the
additional risk to which the insurance company is exposed as the insured
gets older. All in all, the 20 tear term life insurance policy is fairly
inexpensive and does the job it is intended to do.
Unlike whole life insurance, universal life insurance or variable life
insurance, term life insurance does not have cash values or earn
dividends. There is a fairly new type of term life insurance policy,
however, called a return of premium policy which returns all your premiums
at the end of the term period, if you do not die. The premiums are so high
it may not be worth your while to buy this type of term policy. |
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