What is a term life insurance?

Term life insurance offers an affordable and easy to understand life insurance policy. As its name suggests, term life offers coverage for a specific period of time. This time period is usually between 5 and 30 years. Once the term of your insurance policy expires, you can opt for renewing it, but you will have to pay higher premiums. Term life has remained popular among insurance buyers over the years. This is mostly due to the affordable coverage it offers at a time families may need it most, e.g., until the children need childcare, or leave home, or your mortgage is paid off, etc.

Term life insurance has the following categories.

Simplified Issue Life Insurance

Simplified issued life insurance offers immediate coverage if you qualify for a policy. You do not need to take a medical exam, but you will be required to answer health questions. Since the insurance company is insuring you without getting to know your health problems, you will be charged higher premiums.

Simplified issue life may be the best life insurance policy for you if you want immediate health coverage but don’t want to take a health exam.

Return of premium life insurance

Among the biggest concerns people have about term life insurance is that they are paying for a what-if scenario hoping it never happens and, in most cases, outlive their policies. Do you get your premiums back if you outlive your policy? No, your insurance company uses them to pay the death benefit of other applicants.

If you purchase a return of premium policy, the insurance provider reimburses most of all of your premiums if you outlive your policy. This is usually for policies with a term of 30 years. You can also purchase a return of premium rider. You will no longer be eligible for reclaiming your premiums if your policy lapses.

Return of premium life insurance is the perfect life insurance policy for you if you want a term life and your premiums back at the end of the term.

Level Term Life

With a level term life, you are guaranteed the same premiums throughout the course of your policy.

Increasing Term Life

Increasing term life offers a death benefit that increases with every passing year of the policy. This means your premiums will also increase. The death benefit usually increases between 2 and 10%.

This may not be the best life insurance option as, over the course of the policy, the increasing premiums will reduce the value of coverage. It is also possible that the premiums increase at a higher rate than the death benefit.

What happens to my premiums if I outlive my term life policy?

When that happens, you will not be returned the premiums you paid, unless you owned a return of premium policy. Once you pay your premiums, your insurance company uses that money to pay out death benefits for other clients.

What do I do if I outlive my term life policy?

Once your term life policy expires, you can still continue it by paying your premiums. Life insurance companies allow that up to a certain age without requiring any evidence of good health. You can opt for the following options when your term life policy expires:

  • ·     Renew your policy
  • ·     Purchase a different policy
  • ·     Convert your policy
  • ·     Allow your policy to lapse

Renew your policy

Though an expensive option, it may be right for individuals with poor health. Such people may not have any other option when the policy expires. Purchasing a new policy will require health exams, which they may not be able to clear. Renewing the term policy, on the other hand, does not require any evidence of good health, even if you are 95 years old. The cost of premiums, as mentioned before, will be higher and will continue to increase every year.

Purchase a different policy

If you have no major health problems, you can easily qualify for a new life insurance policy. Your insurance provider may require you to answer health questions or take a medical exam. Purchasing a new policy is often a more affordable option than continuing with the term policy.

Convert your policy

Converting a term life policy often involves changing your policy to a permanent life insurance policy. Some insurance providers may require evidence of good health, so you might need to take a health exam or answer medical questions. Insurance providers also have their own separate guidelines. Some allow you to convert your policy before a certain age, within a certain number of years or before the term expires.

Allow your policy to lapse

This may be the right option for you if you are no longer in need of insurance. As mentioned before, insurance companies continue with your policy even after the term expires as long as you pay your premiums. If you want your policy to lapse, just stop paying the premiums. Your insurance provider will understand that you no longer want to continue with the term life policy.

How do I purchase a term life policy?

You can purchase a term life policy directly from the insurance company, or online, or indirectly through insurance agents and brokers. Before purchasing an insurance policy, do your research, so you know what you need. Compare the different insurance plans to narrow down the ones that best go with your requirements and budget. Once you have chosen a policy, go to the insurance provider.

The application usually requires filling out a form with your details. Depending on your provider and the type of policy, this form may be one or ten pages long. You may have to take a medical exam after this. The insurance company will then decide whether to accept or reject you.

Is term life insurance right for me?

When it comes to insurance policies, there is no right or wrong life insurance policy. The best insurance policy for you is the one that meets your needs and is within your budget. Term life may be the right insurance for you if you want temporary coverage at affordable rates. If you have young children, a term life policy might be a good idea. If you are the only one working, how would your family take care of themselves if something happens to you? Your spouse would be left financially struggling. In the same way, if your spouse passed away, you would need childcare to look after your children. A term life policy offers protection until your children are old enough to take care of themselves.

How long should my term life policy be?

The length of your term life policy depends on your situation. This section will go through the different term lengths and when they might be suitable for you.

Do I need a 30 year policy?

A 30 year policy is usually the longest term policy available and will thus cost the most. Will you need a 30 year policy? It is a good idea when you are young and have many goals ahead you as it gives you the flexibility you need. A 30 year term is a good choice if you are from among the following:

New homeowners

Most fixed rate mortgages have a term of 30 years. If you pass away during that time, the proceeds from the term life policy will allow your family to pay the mortgage.

Newlyweds

For newly married couples, a 30 year term gives enough time to pay off any debts and mortgages until they are close to retirement.

Parents of young children or children with special needs

With children, a term life policy is necessary until they are old enough to look after themselves, of your child has special needs, a 30 year term gives you long enough to decide a suitable financial plan for them.

Sole breadwinner

If your family is completely dependent on you for money, you will probably need a policy that will cover you until retirement

Do I need a 30 year policy?

A 30 year policy is usually the longest term policy available and will thus cost the most. Will you need a 30 year policy? It is a good idea when you are young and have many goals ahead you as it gives you the flexibility you need. A 30 year term is a good choice if you are from among the following:

New homeowners

Most fixed rate mortgages have a term of 30 years. If you pass away during that time, the proceeds from the term life policy will allow your family to pay the mortgage.

Newlyweds

For newly married couples, a 30 year term gives enough time to pay off any debts and mortgages until they are close to retirement.

Parents of young children or children with special needs

With children, a term life policy is necessary until they are old enough to look after themselves, of your child has special needs, a 30 year term gives you long enough to decide a suitable financial plan for them.

Sole breadwinner

If your family is completely dependent on you for money, you will probably need a policy that will cover you until retirement

Do I need a 15 year policy?

A 15 year policy may be right for you if you are from among the following:

Parents to school going children

If your kids are already in school, a 15 year policy will be enough until they are in college.

Caregivers for old parents

A 15 year policy might be enough to support your elderly parents even after you pass away.

Homeowners with a mortgage

If you have a mortgage, a 15 year policy will be enough to pay for it should you pass away.

What is term life insurance?

Term life insurance is a type of life insurance. It offers coverage for a specified time period. This time period is generally ranges between 5 and 30 years. You pay your insurance company your premiums for this specified period of time. If you pass away during the course of the policy, the insurance company pays your beneficiaries the death benefit. Once the term of the policy expires, you can have it renewed, but you will be charged higher premiums.

Term life insurance is popular among people as it is easy to understand, affordable, and offers coverage at a time when families most need it. This is usually when the children are young, or the mortgage needs to be paid, etc.

What happens if I outlive the term of my term life insurance policy?

Most people do outlive the term of their term life insurance policy. When that happens, you can opt for the following options:

Extend or renew the policy

As long as you continue paying your premiums, most term life policies allow you to extend your life insurance policy. They won’t require any evidence of good health till the age of 95, in some cases. Most people with poor health opt for renewing the policy as, generally, it is the only option they have. Extending the policy will cost you higher premiums, and they will only continue to increase every year. If you are in good health, you will be able to find better insurance policies at reasonable rates. 

Buy a new policy

This is often the most preferred option as it is more affordable. But you will need to prove that you are in good health to be able to secure reasonable rates. You will have to answer detailed health questions and take medical exams.

Convert the policy

This involves converting your term life to a cash value plan. Most insurance companies will allow you to do so without requiring any evidence of good health until a certain age.  Converting the policy may require you to answer health questions or take medical exams. You can convert to a whole or universal life plan. Different life insurance companies have different conversion guidelines. Some may allow you to convert your policy before it expires; some will allow you to convert during a specific time, e.g., the first five years, others may allow you to convert before a particular age, etc.

Allow the policy to lapse

If you find renewing the policy expensive, can afford a better policy, or are no longer in need of coverage once your policy expires, you can opt for this option. You lapse coverage by not paying the premiums when the term expires.

Do I get my money back?

No, the premiums you paid stay with the life insurance company and are used to pay the death benefits of those who don’t outlive their policies.

How does term life Insurance work?

For as long as your policy requires, you pay your insurance provider your premiums. If you pass away during the term of the policy, the insurance provider will pay your beneficiaries the death benefit. This death benefit can be used to cover your end of life expenses, pay for your children’s education, pay the rent or mortgage, etc. The beneficiaries decide how they want to receive the death benefit, a lump sum or an annual payout. 

If you outlive your policy, you have different options, you can either renew it, opt for a new one, or allow the policy to lapse. You will not, however, get your premiums back. The premiums once paid will be used by the insurance provider to pay the death benefits for clients who have passed away.

Term life policies offer no cash value component. They only provide a death benefit if the insured passes away during the term of the policy.

You can apply for a term life insurance policy online, through an agent or directly through the insurance provider. You may have to answer medical questions or take health exams. The insurance provider will decide your eligibility based on how much risk you pose, a process known as underwriting. 

Term life insurance has remained a popular option among buyers. Some of the reasons for its popularity include affordable premiums, simple to understand, and it only offers coverage for a certain time. This particular time, for some families, maybe when they need life insurance most. This may include the years when the children are young and completely dependent on you, or until you can pay off your mortgage or any other debt, etc.

What happens to term life insurance at the end of the term? 

Term life insurance is a category of life insurance policy. With a term life insurance quote, you are covered for a certain period of time. This time usually ranges between 5 and 30 years. If you pass away during the course of the policy, the insurance company will pay your beneficiaries the death benefit. Compared to other life insurance policies, term life is usually preferred by customers. It is because it is an affordable life insurance policy, easy to understand, and offers coverage for a particular time.

Most people outlive term life policies when that happens, you opt for the following:

  • Allow your policy to lapse
  • Convert your policy
  • Purchase a different policy
  • Renew the policy

Allow your policy to lapse

With most life insurance companies, you can continue your term life policy if you pay your premiums, even after it expires. Your term life policy will lapse if you stop paying the premiums, and the insurance company will understand that you no longer want to continue with the policy.

Convert your policy

This option allows you to convert your term life policy to a whole or permanent life insurance policy. This conversion may require you to prove that you have good health, so you will have to take medical exams and answer health questions. Depending on your insurance provider, the conversion guidelines may vary. Some may allow you to convert before you reach a certain age; some may require that you do it before the policy expires, and some may allow it during a specific time.

Purchase a different policy

If you are in good health, you can easily purchase a different life insurance quote at affordable rates. You may need to take a medical exam or answer health questions.

Renew the policy

This is an expensive choice, and most people who have poor health opt for this as they don’t have another option. Extending or renewing the policy does not require any proof of good health, even till the age of 95. The premiums will be higher and will continue to increase every year.

Keep in mind that if you outlive your policy, you will not be paid back your premiums, unless you purchase a return of premium policy. Once you pay the insurance provider, it uses that money to pay the death benefit to other clients who have passed away.