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Term Life Insurance – A Guide

As its name suggests, a term life insurance policy is one that covers the policyholder for a defined amount of time. Unlike whole life insurance which covers the insured throughout his lifetime, term life insurance offers a payout to the beneficiary only if death occurs during the term of the policy. In this sense, term life insurance is similar to other risk-protection insurances such as homeowner’s insurance or auto insurance, in which the insured expects compensation only in the case of emergency but does not intend to use the insurance plan as an alternate form of savings. Term life insurance among the most affordable types of life insurance and is generally purchased by those who are looking to cover expenses for loved ones in the event of death. If you’re in the market for life insurance, it’s definitely worthwhile to consider a term life insurance policy.

There are several different types of term life insurance to consider:

1. Level term – The most popular and straightforward type of term life insurance, level term usually demands fixed premiums for a fixed amount of time, in exchanged for a fixed death benefit during the life of the term. Standard contracts are anywhere from 10 years and up.
2. Decreasing term – This insurance policy requires the insured to pay set premiums each month, but the death benefit decreases over the life of the term. Decreasing term life insurance policies are suited to consumers who have decreasing financial responsibilities over time, such as consumers who plan on paying off their mortgage or paying off their college loans.
3. Increasing term - Increasing term life insurance offers an increased death benefit over time while premiums remain stable. This option is not especially popular because it usually requires contract renewals each year and premiums tend to increase each time the contract is renewed.

4. Renewable term – Renewable term life insurance policies enable customers to renew their policy for another term without proving that they are in good health. In most cases, the premiums for the renewed policy will be higher than the original premiums. In most cases there is a maximum age limit until which the consumer can pay into his term life insurance policy. For example, in New York State, term life insurance cannot be renewed past age 80.
5. Convertible term – This form of insurance enables the insured to convert his term policy to a whole life policy at any time during the term. This is a popular option among young people who are looking for affordable life insurance but who may need to create a longer-term solution or to provide for a growing family in the future.
6. Group term – Group policies are often purchased by employers or other associations who are looking to obtain reduced rates for their members.

Term life insurance is a great choice for most people under 50 because affordable premiums can yield big payoffs in the event of an emergency. If there comes a time during your term where you have extra money to invest in your future you can invest in a higher-yield option that can increase the value of your portfolio. Once you hit age 50 your premiums will likely increase and some life insurance companies may deny you term insurance altogether. In this case, whole life may be a more viable option.