A Brief Review of Term Life Insurance
Term life insurance is hailed by some financial gurus and derided by others. The truth is that it is neither the greatest thing since bread slices nor the worst since the Great Depression. Term life insurance is simply temporary protection that provides coverage for a specific period of time. This article discusses several types of term insurance plans in an aim to help readers make informed decisions as to what type of term life insurance- if any- suits their needs.
Term life is often called pure life insurance because there is no cash value or other living benefit, no money is payable if the policy is terminated or expires before the insured dies, and the death benefit will be paid only if the insured dies before the term expires. This temporary insurance coverage provides the greatest amount of coverage for the smallest amount of money.
Insurance companies offer several types of term life protection. The remainder of this article will list and explore several types before concluding.
Types of Term Life Insurance
- Level term: This is the most common type of term coverage. The death benefit does not change throughout the policy. The premium is level and does not change, either.
- Annually renewable term: Coverage under this policy may be guaranteed without proof of insurability. However, the premium increases annually because the probability of death increases. The death benefit remains level.
- Life expectancy contract: This term policy provides coverage with level premiums and a level death benefit for the number of years equal to the average life expectancy of the person being covered (called the insured).
- Term-to-65 contract: This is a popular type of insurance policy. It provides a level death benefit for a level premium that lasts until the insured’s 65th birthday.
- Decreasing term: Under this policy, the insured pays a level premium in exchange for a death benefit that decreases annually. It often used to insure mortgage or debt pay-offs in the event of premature death. The death benefit decreases to $0 at the end of the coverage term.
This has been a brief review of the types of term life insurance. Perhaps, this article has somewhat broadened readers’ understanding of what their options are when considering the purchase of temporary insurance coverage. Those seeking life insurance coverage should not only have some understanding of the types of coverage available; they should also acquire some knowledge of the agency and insurance company with which they ultimately deal.
Evan Blackmon, M.Ed., Financial Advisor
First Financial Group
1869 Charter Lane, Suite 201
Lancaster, PA 17601 Phone: 717-393-4465
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 670 North River
Street, Suite 300, Plains PA 18705. 570-829-0717 Securities products and advisory services offered through PAS, member FINRA, SIPC. First Financial Group is not an affiliate or subsidiary of PAS. 2015-16247 Exp. 12/2016.