Term Life Insurance Explained

Term life insurance is an insurance policy that is available for a specific amount of time and only pays out if the insured dies during that period of time.  An annual premium is paid for a predetermined amount of life insurance and if the insured person dies, the beneficiaries collect.  If the insured does not die during the specified time, the premium is gone which is generally the main downside of this type of policy. In addition, because term life insurance rates are based on the possibility of the insured’s death, rates increase with age or any medical conditions.  However, this can be the least expensive insurance option and is the simplest to obtain.

Who Needs Term Life Insurance

A term life insurance policy usually has a low premium to start with and an annual renewable contract.  As the insured ages, the premium increases.  This makes this type of policy ideal for young families who have financial obligations, mortgages and young children who will potentially be left financially bereft if anything were to happen to the insured.  Because it is the least expensive insurance option it is also ideal for those with limited funds who don’t have a company insurance plan.  This type of insurance policy can help beneficiaries pay off any future college costs, funeral expenses, estate taxes or mortgage payments.

Important Components of a Term Life Insurance Policy

When purchasing a term life insurance policy, make sure that it has a guaranteed renewable policy so that if any future medical issues arise, the insurance policy cannot be terminated.  This also means that a mandatory health check-up will not be required for each year of the insurance policy.  Insurance experts also recommend a policy that is convertible to a whole life cash-value plan later if needed.  Another factor to look at when purchasing a term life insurance policy is the length of the policy.  Terms go from five to thirty years.  The advantages of the longer term are lower rates over time, but a higher up-front cost.

Top Insurance Companies for Term Life Insurance Policies

There are many insurance companies offering term life insurance policies, but which one is the best option for you?  Insurance companies are rated by Moody’s, A.M. Best and Standard and Poor based on differing criteria and computer based analytical systems.  Find out about your insurance company’s financial health, look at different policies, be honest and have your basic personal health information available.  Some of the top term life insurance companies are ING, American General Life, Banner Life Insurance Company and Transamerica Life Insurance Company.

Term life insurance offers consumers the opportunity to purchase low cost, temporary insurance.  Determining how much term life insurance is needed should be based on how long your dependents need it to live comfortable in the event of your death.   An easy equation to figure out how much insurance to purchase is to multiply income by the number of years until retirement.  Factor in mortgage costs, college expenses and other financial obligations and then research insurance companies to find the most comprehensive coverage at the best cost.

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