Term Life Insurance Guide
Term Life Insurance Mechanics
It may be helpful to have a term life insurance guide, either in the form of a person who knows these policies inside out or in the form of written information on a website, if you are in the market for life insurance.
On the other hand, may be you just want to get a better understanding of the term life insurance policies you already own.
I would like to apply for the position as your term life insurance guide. My services will not cost you anything. Let us examine each policy in detail starting with those that are less costly.
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Term Life Insurance Guide - Why Buy Term
The Decreasing Term Life Insurance Policy
People find this policy very attractive as they more often than not use this policy to pay off the balance owed on a mortgage in the event of death. Here is how it works...
You buy a house for, let us say, $250,000. You pay down $75,000 at the point of purchase as you want to keep your monthly payments as low as possible. You borrow $175,000 from your bank or mortgage company. You agree to repay the loan over the next 20 years...
The monthly payment is no problem to make as you either have a good job or you have a business that provides sufficient income to afford you and your family a comfortably lifestyle. You are concerned that if you died suddenly you would want them to have this house completely paid off. The decreasing term life insurance policy was designed for that.
The very inexpensive premiums remain level for the entire 20 year period. The death benefit decreases as the amount you owe decreases. So upon your death, regardless of how you die, your family will have a debt free home.
The Yearly Renewable Term Life Insurance Policy
Your term life insurance guide is not particularly fond of this policy even though the initial premiums are very inexpensive. You see, even though you start out with a very cheap premium it increases every year.
The premium cost is fair because the older you get the more risk the life insurance company is taking but it doesn't take too many years before these premiums get to a prohibitive level.
If you buy this policy because of the initial low cost you should convert it to a permanent policy as soon as possible or buy a level term policy for a longer period of time...if you can still qualify for it. The death benefit of yearly renewable term remains level for the duration.
- The 5 Year Level Term Life Insurance Policy
Like the yearly renewable term policy you buy this one to take care of short term needs like covering an outstanding loan or may be using it to guarantee that your child or grandchild can continue paying the college costs you are now paying or plan to pay.
You want to know that even if you died tomorrow this will be taken care of. Your term life insurance guide likes this one. The premiums are fairly inexpensive and the death benefit also remains level for as long as you own this policy.
- The 10 Year Level Term Life Insurance Policy
As the name implies the death benefit is level and remains so for 10 years. It is used for similar reasons as the 5 year term but because you want to assure yourself that if you should need the policy for a longer period of time you can keep it. Some people use this policy as a kind of temporary problem solver.
You need life insurance now but you cannot afford the policies for longer terms so you buy this with the intention of converting it or buying a longer term policy later. This is a level premium policy also favored by your term life insurance guide.
The 15 Year, 20 Year, 25 Year And 30 Year Term Life Insurance Policies
Now we are getting to the more popular policies. Your self appointed term life insurance guide likes all these policies but has a greater affection for the 20 year term policy. The premium seems just right and as many people tend to plan no further ahead than 20 years this fits many a situation perfectly.
These policies are used to provide lump sums or income for families in the event of the death of a breadwinner. Corporations tend to use them to fund buy-sell agreements or for key employee insurance.
The death benefits remain level for the duration and so do the premiums in most cases. Some companies start the premiums much lower and increase it every 5 years or so. In some cases there is no increase until after 10 years.
There are some life insurance companies that offer term life policies that last up until age 65, age 80 or age 90.
Life insurance companies also offer the waiver of premium rider as well as the accidental death benefit riders which you can attach to these policies.
I hope this term life insurance guide made the functions of term policies a little clearer to you.
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