An Introduction to Term Life Policies
One of the simplest forms of insurance is term life insurance; however, it is also one of the most complex. Understanding the basic principles and concepts of term life insurance as well as knowing the definitions of several of the key terms will allow you to select a plan that will best suit your personal situation.
Term life insurance policies are policies that stay in effect for a pre-determined period of time. Common term lengths are 5-year, 10-year and 25-year. At the end of the term length, the policy expires. It is important to understand term lengths because they affect your death benefits. Should you die after your policy has ended, your beneficiaries will not receive your death benefit payout. Many insurance companies and policies have an available option that will allow you to convert your term life policy to a permanent life policy. The only limitation on this option is a statute of limitations. You will only have a certain period of time, for example two years, in which to convert your policy from term life to permanent life. This is a particularly helpful option for term life policy holders that develop a medical condition that would bar them from obtaining additional life insurance once their term life policy expires. This option will allow policy holders in this situation to have continuing life insurance coverage.
An especially attractive term life policy is the yearly renewable term life policy. This is the least expensive way to get life insurance in the short term. Premiums are initially very low; however, the premiums increase each year. This premium cost increase is due to the fact that you are aging and more likely to develop a medical condition that may lead to your death. This policy is ideal for someone looking for a short term solution to their life insurance needs. It is important to remember when purchasing a yearly renewable term policy that the cost will eventually become prohibitive, so it is a good idea to have a more permanent and cost effective solution for the long term.
Perhaps the most popular term life policy is the decreasing term life policy. These policies were designed for home owners. In the event of the death of a home owner and policy holder, this term policy will pay off the balance of any mortgages on the property. For policy holders looking to ensure the financial security of their beneficiaries, the decreasing term life policy is ideal. It is because of this protection that this policy is so popular. Anyone with mortgage and a home should consider purchasing this policy above all others.
Also popular are the term life policies with different term periods. A person with a need for term life insurance who cannot afford a long term policy may choose to purchase a five or ten year policy. These policies will give them the coverage they need and, as previously discussed, can be converted at a later date.
Selecting the term life policy that best fits your situation does not have to be difficult. Today, policies are available for almost everyone. Younger people, struggling financially, can get insurance through a yearly renewable or short policy. Even the elderly have access to special 65 year or older term life policies. Discuss your options with a qualified insurance broker to make sure you get the policy that is best suited to your needs.
