Understanding Term Insurance Basics
Term life insurance explained. Learn how popular term life policies work, get the details.
You may want to know what term life insurance is all about. You can read your term policy but this explanation simplifies what it tells you.
Why would you buy term insurance? There are two basic types of term life policies.
They both have level death benefits but one type has premiums that increase every year.
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Different Types Of Term Life Insurance Explained
- Increasing Premium Term Insurance
This policy has a level death benefit, in never increases or decreases, but it has a premium that increases every year. This is life insurance in it’s purest form.
You will appreciate that as you get older the more life insurance costs. It is more likely that you will die as you get older. This is really a one year term that charges you a premium based on your attained age.
- Level Term Life Insurance
Most term policies have a level premium as well as a level death benefit. The 5 year, 10 year, 15 year, 20 year, 25 year, and 30 year term policies have level death benefits and level premiums.
The plan you choose will depend on your particular need. Do you want a policy to guarantee the payment of college cost? Do you want to replace the valuable contribution of a non working spouse or do you want to replace a spouses income in the event of his or her death?
Do you want to guarantee the continuation of a business? You could use life insurance to fund a buy sell agreement or you may want to buy a policy on a valuable employee.
The funds provided by the key employee life insurance policy would help the business readjust in the event of the employees death.
Term life insurance was designed to fulfill a temporary need. You should consider converting it to a policy that would last the rest of your life. The period for conversion is usually shorter than the term policy. This would be stated in the contract itself.
If you are strapped for cash and need the maximum coverage for your dollar term insurance is ideal.
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