Commonly known as a temporary insurance, term insurance provides protection for a specified period of time, usually between 1 – 30 years. Term insurance is usually renewable at the end of each period at the progressively higher rate. Term life insurance is well suited for a young family looking to obtain a large amount of protection, at a low cost.
People usually choose this type of insurance for the following reasons:
 Cover Mortgage Expenses
Protection while children are in school, college or university
Protect dependents (in personal or business settings)
Types of Term Life Insurances
Renewable: The policy renews itself automatically in every year. The premium goes up at the beginning of every year to reflect the increase in age. There is no need to take annual medical exams. This type of policy is usually renewable to age of 70
Level: The premiums are guaranteed to stay the same over a period of time, usually for the term of the policy.
Decreasing: The face amount (aka Death Benefit) of the policy decreases over time while the premium payments stay the same.
Return of the premium (ROP): If the insured dies while the policy is in-force, the beneficiaries will receive the death benefit amount. If the insured lives beyond the policy term, the owner receives the premium amount back.
Advantages of Term Life Insurances
Initial premiums less expensive than premiums of permanent insurance policies.
Allow to buy a large amount of insurance when one is young, and when it is needed the most.
Great coverage when needed for temporary period of time (ie: until children are finished with colleges or as a protection for a loan).
If uncertain about the amount of permanent insurance needed to purchase in the near future.
Many term insurance policies offer a conversion privilege for a period of time. This allows the insured to convert the term policy to permanent policy without proof of insurability. |
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Disadvantages of Term Life Insurances
If insured wants to continue the coverage after the term expires, it may be too expensive.
Term life insurances do not accumulate cash-value.
In the long run, term like insurance may become more expensive then permanent insurance.
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