What Is Term Life Insurance?
Term Life Insurance is the type of life insurance that provides coverage for a specific period chosen by the insurer himself according to his needs or requirements. Usually, the term period is 10 to 30 years. If the insurer dies, the insurance payment is paid to the beneficiaries as the death benefit. The premium rate is decided as per the insurance quote, and the insurer needs to pay them monthly or annually. Term Life Insurance can be purchased by anyone who is 18 or beyond. The process requires a medical exam or health-related questionnaire to be given. Usually, the breadwinners of their family acquire the term life insurance because, after their death, the insurance payment works as an income replacement. Where there is s guaranteed death benefit, term life insurance does not have the feature of building the cash value.
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What is the difference between term life and whole life insurance?
The vital difference between term life and whole life insurance is the coverage length. Term life insurance offers coverage for 10, 20, or 30 years as per the term selected by the insurer. In contrast, whole life insurance provides coverage for the lifetime. Term life insurance only provides a guaranteed death benefit. In contrast, the Whole life insurance comes with death benefit as well as cash value. The cash value is the saving component of the whole life insurance. This makes whole life insurance a little more expensive than term life insurance.
Benefits of term life insurance
Term Life Insurance is an ideal policy for those who want insurance coverage but for a specific term. This saves them from the trouble of paying premiums throughout their life. The option to choose the coverage amount and term length as per one’s own requirements make it flexible and easily accessible. Term Life Insurance comes with a guaranteed death benefit. Suppose the insurer dies during the policy period. In that case, the insurance payment is paid out as a death benefit to the beneficiaries. The payment can be used to pay for the final expenses such as funeral costs or repaying the deceased’s debts. With the feature of purchasing multiple term policies at a time, the insurer has the option of keeping separate insurance policies for different purposes, such as a 30 years policy plan to secure the family’s financial future and ten years policy to cover the business loans. Term Life insurance policy can be customized with the add-ons, called riders. This helps the insurer increase the coverage option.
How much term life insurance do you need?
The insurer decides The coverage amounts and the term length for the term life insurance policy himself according to his own requirements. Many people opt for this policy option because they want to secure the financial future of their loved ones, such as for the Children’s tuition money. This decides the premium rate, but on average, the monthly average cost of the premium can be $20 to $30.The factors that affect the cost are health, age, coverage amount, term length, and riders. Taking a medical exam or health information questionnaire determines the health status of the insurer—the cost increases for people with any health issue or family illness history. Older people are charged more as compared to younger people. Similarly, increasing the coverage amount and term length makes the policy more expensive. To understand how much life insurance one needs, there needs to be a vivid objective behind why one needs insurance. This can help them customize a better policy that caters to their needs.
Types of term life insurance
Level term or level-premium policy
Level Term Life Insurance is a subtype of term life insurance. The rate of the premiums remains the same throughout the term, but the provided amount of the coverage increases. It is the simplest form of an insurance policy. Level term policy promises more coverage than paid premiums.
Decreasing term policy
In decreasing term life insurance, the coverage amounts or death benefit decreases over the time of the policy, whereas the premium rates remain fixed. This policy option is not a viable option because you are getting a smaller amount of what you have constantly been paying at the end of it.
Yearly renewable term (YRT) Policies
Some Term Life insurances also include the option of renewing the policy after the original term has expired. This allows the continuation of the term without undergoing the medical examination. However, the premium payment may increase due to the aging factor.
Term Life Insurance Companies
AIG belongs to the group of the biggest insurance companies that provides its services worldwide. The term life insurance provided by AIG Insurance varies as per the term length and coverage amount. The minimum coverage amount is $50,000, but it can increase up to $10 million depending on the insurer. The age bracket varies according to the policy option. For ten years policy option, the age is 20 to 80 years, whereas, for 35 years, the age bracket is 20 to 45 years.
Transamerica is an American-based Insurance company that was founded in 1904. It provides two types of term life insurance: Trendsetter Super Series and Trendsetter LB. The policy term ranges from 10 – 30 years; however, the longer-term length is recommended for young and healthy people. For Trendsetter Super Series, there is an accelerated death benefit in terminal illness, which is over $50,000. No medical exam option is available for Trendsetter LB if the death benefit is lower than $250,000, whereas, for Trendsetter Super Series, no medical exam option is for death benefit below $100,000
March, John Hancock
John Hancock Insurance company is a Boston-based insurance company that provides term, whole, and guaranteed issue life insurance. The policy options available are 10, 15, 20, and 30 years for term life insurance. With fixed premium rates, the coverage amounts range from $25,000 to $65 million.
Northwestern Mutual was established in 1857 and provides a wide range of insurance services. The term life insurance starts with the coverage of $100,000. The age limit varies according to the term selected.