Affordable Life Insurance Protection for Your Family

How Term Life Insurance Works

A Beginner's Guide to Understanding Term Life Insurance

Term life insurance is a Cost-Effective way to provide financial protection for your loved ones in the event of your untimely death. It offers coverage for a set period of time, typically ranging from 10 to 40 years, and pays out a death benefit to your beneficiary if you pass away during the duration of your life insurance policy.

One of the key advantages of term life coverage is its affordability. Since it does not build cash value inside the policy, it is considered "Pure Protection" and typically costs significantly less than permanent life insurance options. This makes it an ideal choice for anyone on a budget that still wants to ensure that their loved ones are financially protected in the event of their death.

Another important aspect of term life insurance is the Flexibility it offers. Depending on your current age and health, you may be able to select a policy term that aligns with your specific needs and goals.

For Example, if you have young children and want coverage until they are financially independent, you may want to choose a 20-year term policy. If you are nearing retirement and want to provide for your spouse in case you die, a 30-year term policy may be a better option to consider. Also, if you want to provide funds to pay off your 15 year mortgage loan in case you die, then a 15 year term policy would help you accomplish this goal. 

NOTE: It's important to understand that once the term of your life insurance policy ends, the coverage will also end. If you are still alive, you will no longer be covered by the policy, and will need to apply for a new policy if you still need life insurance protection.


Term Life Insurance Explained


Term life insurance provides you with temporary life insurance for a specific number of years.

Usually, term life policies offer coverage up to a maximum duration of 30 years.

However, depending on your current age and health, you may be able to select a "Policy Term" that provides protection for a period of 10, 15, 20, 25, 30, 35 or 40 years.

Term life builds no cash value inside the policy, it is not an investment, it is "Pure Protection".

Permanent life insurance usually costs up to 5-10 times more than term life insurance.

  • Term life is the lowest cost type of life insurance.
  • Level term life insurance has premiums that never increase and coverage that never decreases during the life of your policy.
  • Term life insurance lasts for a set period of time up to 40 years.
  • Term life policies pay the beneficiary the face amount of the term life policy if the insured person dies during the term of the policy. 
  • For example, a 10-year term life policy with a face amount of $250,000 would pay $250,000 to your beneficiary if you die any time during those 10 years. 
  • If you're alive at the end of the policy term, the coverage ends. 

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Term Life Insurance Has Three Standard Features:

  1. Level
    The annual insurance premium for your life insurance policy stays the same each year. The face amount of life insurance coverage also stays the same. Level term life insurance policies can last up to 40 years.

  2. Convertible
    Before the end of the term for your policy, the life insurance policy owner (you) may be able to convert the term life insurance policy into a permanent life insurance policy. The owner usually has a specific number of years during the term life insurance policy to convert the policy. Your life insurance premiums will be higher for the permanent life insurance.

  3. Renewable
    Term life insurance policies that are renewable offer the owner of the policy the option of renewing the life insurance policy at the end of the term, up to a specific age limit (usually age 65 or 70).

    For example, a 15 year policy may be renewed for another 15 years when the first policy ends. If the policy is renewed, a medical exam may or may not be required. The term life insurance premium will usually increase when the policy is renewed.


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Resources:


How Term Life Insurance Works | Life Insurance Quotes

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