About Term Insurance

Term Insurance provides life insurance coverage for a specific period of time, one year, five year, ten year, and fifteen years, etc. If the insured dies during the period the insurance is in force, the insurance company pays off the face value of the policy. If the insured lives longer than the term of the policy, the policy is no longer in effect and nothing is paid. The insured builds up no cash value in a term policy.

Term life insurance is the least expensive form of life insurance. It is most often used when the insured needs temporary protection or can't afford the premiums for the permanent life insurance. The other reason an insured may want term insurance is to purchase term life insurance and invest the cost difference between the term policy and a permanent cash value policy. Many times an insured feels he can do better investing his funds elsewhere. This last strategy may or may not be the best for that particular individual. It may be possible to do. The insured may be able to get a far better return on his funds than he would with the insurance company. However, I don't recommend this last form of insurance purchasing and investing the difference elsewhere. Better to keep things simple. Buy the proper type of insurance coverage for you and forget about getting tricky.

Term insurance comes in several forms. They can be dealt with very quickly. There is renewable and non-renewable. Non-renewable means that when the policy expires you must re-qualify usually by taking another physical and filling out another health questionnaire. On the other hand, with renewable term, you automatically re-qualify to continue your policy. Needless to say, I don't recommend that anyone ever purchase non-renewable term. There is also convertible and non-convertible term insurance. Convertible term means that the insured can convert his term policy to a permanent policy such as whole life, universal life, or variable life. Non-convertible term means that you can't convert the policy to another form of life insurance. Needless to say, I recommend that you always purchase convertible term.

Term insurance comes in two other forms which are not as easy to determine which to purchase. These two types depend on the individual circumstances of the insured. The first of these is Level Term Insurance. Level term insurance provides a specified amount of coverage for the entire period of the policy. For instance, a five year level term life insurance policy in the amount of $250,000 will pay $250,000 at any time during the course of the policy, should the insured die while the policy is in effect. There is also Decreasing Term Life Insurance. Decreasing Term Life Insurance pays a sum of money which decreases over the period of the policy. One would purchase decreasing term insurance if the financial needs of the insured decrease over time. For example, if one might purchase decreasing term insurance for protection with a mortgage. Both the term insurance and the mortgage decrease over time.

Another consideration when purchasing term insurance is the quality of the insurance company you're purchasing it from. Many times, a person's needs change over time. It may have made sense to purchase a term life insurance policy when you did. However, with the passage of time, your needs may have changed. As a result, when the term policy is soon to expire, you may want to continue with life insurance coverage, but of a different nature. When purchasing term insurance, I recommend that you investigate the company's permanent policies (whole life, universal life, and variable life). The reason for this is quite simple and sound. If you buy a convertible term policy and seek at some point to convert it to a permanent policy, you will want to be able to convert it to a good permanent policy. It's fine to shop around for the best price for term insurance. However, you must be sure that the other products the company sells are good and sound. Therefore, when shopping for a term policy, compare the permanent life insurance products the different insurance companies sell.

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