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The easiest type to understand the life insurance is the term life insurance. In plain words, the insured person pays minimal premiums per thousand of dollars of the coverage on the monthly, quarterly, semiannual or annual basis. If te person dies within the term of the life insurance policy, the life insurance company has to pay the face value of the policy to the beneficiaries.
For better understanding of the distinctive characteristics of the term life insurance you have to consider the following points:
First of all, the term life insurance is the “pure insurance”, because when you are buying the term life insurance, you just buy a “death benefit”. In comparison with other types of permanent insurance such as the universal life insurance, the whole life insurance, and variable universal life insurance, in the term life insurance there is no extra cash value. The term life insurance only gives you the specific death benefit.
The next one is that the coverage is granted just for a fixed period of time (the term) such as one year, five years, ten years, and so on. The term life insurance policy remains in force till the term – assuming to your payments – is not expired.
In the third, a lot of the term life insurance policies are renewable at the end of the term. With the level term life insurance policy, the death benefits remain the same during the whole term of the policy, but from that time as the insured person is getting older and older, the premiums will greatly increase. As the time goes, the cost of the level term life insurance may become greater than you are expected, so you may be interested in the decreasing term life insurance policy under which the premiums are remain on the same level, but the death benefit constantly goes down.
Most of the tern life insurance policies can be converted to the permanent life insurance policies within a particular number of years. If once you decided that for you it is important to contain the insurance coverage, the conversion may be something you should plan for. If you foresee the accelerating cost of the term insurance premiums, you may convert your term life insurance policy into the permanent life insurance policy before the premiums become higher. It is true that in the short term policy the premium will generally be higher if you stayed with the term life insurance policy. But over the long term this difference will be decreases because of the rapid acceleration of the term life insurance premiums as you are getting older and older. The permanent life insurance policy also accumulates cash value that increases the total death benefits that will be paid to your beneficiaries after your death.
The choice of life insurance brokers is an important one, because there are lots of life insurance brokers in this industry, but can all of them really “deliver”? Read more about finding and choosing life insurance brokers here.
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