Term Life Insurance Basics Explained
By Marilyn Katz

Term life insurance is probably the most popular type of coverage these days. As the name implies, this coverage is intended to cover an person’s life for a span of time. The term can be almost anything from 1 to 30 years, and I have seen some that covers up to age 65. But people usually buy for a period of 10, 20, or 30 years. Since you are only buying life insurance, and not any sort of cash value, you will probably find that the rates are less expensive then any other type of coverage you could purchase. Rates are also cheaper because the insurance company only has to accept the risk on your life for a period of time. You do need to fill out an application, and you need to answer health questions, so the insurer is taking the risk that you will survive the policy. That’s another reason rates are less then other coverage, like for instance, whole life.

The lower rates allow you to purchase a larger face value. It is common for people to buy enough to cover their home mortgage, other debts, and to provide money for their spouse and children. In other words, values of hundreds of thousands of dollars are common. Now some policies allow you to attach some riders that make your plan more valuable. A return of premium rider, for instance, costs a bit more, but guarantees that all premiums will be refunded at the end of the term if you survive. You can also find disability and critical illness riders that will provide money if you cannot work. Other riders may also pay the premiums if you are unable to work.

The whole idea between buying coverage for a set amount of time is that you are covering your life during peak working years, and when children need to be raised and mortgages need to be paid. The logic behind this is that you will work to save and invest during this time, so that by the time your coverage term expires, you will not need a large amount of life insurance any more. And many long term policies are convertible. In other words, the company will give their customer an option to convert the term policy to a smaller whole life policy when it expires. This whole life policy will have a smaller face value, but will provide cash for things like burials and other final expenses.

Getting a term policy is an affordable way to protect your loved ones if something happens to you, but just make sure you understand what you are buying.

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