A term life insurance policy can seem quite complex to many individuals, but with a little explanation these plans can actually be quite easy to comprehend. It helps to understand the basic principle of a term life insurance policy, which is that it is temporary insurance purchased for a specified length of time. The rates for a term life insurance policy are generally lower than permanent life insurance policies. There are a few provisional options to choose from; renewable, convertible, level and decreasing.
Temporary Life Insurance
Term life insurance policies were designed as temporary life insurance plans to help keep premiums, or monthly payments, lower for those who cannot afford whole life insurance; which is much more expensive. Term life certainly aids those who have a monthly budget and who do not have a lot of extra money to put into a life insurance plan. With this in mind, term life insurance is not for a person’s whole life, you pay the premium for the time frame determined and if you do not pass away during that time, the plan is void.
Termed Life Insurance
Term life insurance is purchased for a selected and predetermined amount of time, not for whole life, and therefore is a cheaper option for individuals to buy life insurance. Term life insurance can be purchased for as little as one year and can be bought for a maximum of up to 30 years. This option allows an individual to evaluate their specific and immediate need for coverage, for example a term life insurance plan may be purchased for a certain amount while the insured is paying their mortgage.
Low Rates and Maximum Rate
Term life insurance plans are known for having much less expensive rates than whole life or permanent insurance plans. The rates for a term life insurance policy can fluctuate so it is important to understand at the time when purchasing a term life insurance policy that a maximum rate is preset to an amount that the insurance company agrees that your rate will never exceed. Make sure that when purchasing a term life policy that the maximum rate established is a rate that would be affordable should the event occur that the rates increase to the maximum amount.
Types of Term Insurance
There are a few options, also called riders that can be added to a term life insurance policy. Renewable term life insurance allows the insured to renew the policy at the end of the term without having to prove good health. Convertible term insurance provides the insured with an option to convert the temporary plan to a permanent plan. Level term life insurance gives the insured peace of mind that the premium, or monthly payment, will never fluctuate. And decreasing term life insurance decreases the death benefit over the course of the term of the insurance.
Term life insurance is simple to understand once the concept is broken down. Basically, term life insurance is a policy that protects an insured for a specified amount of time, always temporary. In addition the coverage is provided when it is needed and for a low rate. Finally, there are options available that can be added to the policy to provide optimal coverage and even more precautionary protection allowing the insured to rest easy concerning the maturity of the policy.