Term-life insurance plans protect you for a certain amount of time. Term-life policies often cover their beneficiaries for 10, 15, or 20 years. Once the plan expires, you can choose to renew it for another term or purchase a new policy from your insurer of choice.
How They Work
When you purchase a term-life insurance policy, your premium will be based on your policy’s value (also known as the payout, or death benefit), your age, health, and gender. The insurance company may also require you to have a medical exam and know what current prescriptions you have, your smoking status, occupation, and family history.
If you do choose to opt for a term-life policy and die during the term, then the insurance company will pay the death benefit to your beneficiaries. Your beneficiaries can use this death benefit to pay for funeral costs, medical bills, debt, and other expenses.
Do keep in mind that this is not a permanent policy like whole life insurance. If your policy expires before your death, your beneficiaries will not receive a payout. You do have the option to renew your policy once it has expired, but your premium will be readjusted because of your age. Also, unlike a whole life insurance policy, a term-life policy does not have a savings component, or any other value besides the death benefit.
However, because term-life policies are for a restricted amount of time, they are typically cheaper than other life insurance options.
Types of Term-Life Policies
While there are several types of term-life policies, the one you choose is ultimately up to you and how you feel it fits your individual situation.
The first type of policy is known as level term, or level-premium. The death benefit and premium for these policies are fixed, and the policy can typically last between 10 and 30 years. However, the premium is higher compared to other term-life policies.
The second type of policy is the yearly renewable term, which does not have a specified term but can be renewed each year. However, these premiums are not fixed, and will increase from year to year as the policyholder ages.
The third type of policy is known as decreasing term. The death benefit for these policies decline each year, based on a predetermined schedule. There is a fixed, level premium for this policy, which is often used with a mortgage to match the coverage and declining principal of a home loan.
Insurance Plans Tailored to Your Needs
✔ Explore Options and Coverages
✔ Find a Plan for your Lifestyle
✔ Get Help with Enrollment