Helping You Define Level Term Life Insurance
The economy may be bad, but there is no reason to put your family at risk by living without life insurance. Level Term Life insurance remains one of the least expensive types of policies you can purchase. While it should not be regarded as your last life insurance purchase, it can certainly get your family through tough times at rates you can afford.
What is Level Term Life Insurance?
Actually, it is exactly what it sounds like. It is life insurance for a time period that you select—from 5 to 20 years. During that “term” your rates will not increase and your coverage will not decrease. Furthermore, the premiums are very low, just pennies per thousand dollars of coverage.
Why is Term Life so cheap?
That’s a very good question and one that aptly illustrates the old saw “you get what you pay for.” Term life is inexpensive because all you have is a death benefit in the event of a tragedy. That is, although the death benefit can be very high—as much as a million dollars or more in coverage if you can afford it and are health-qualified—it has no cash value. This means that if you are more than 30 days late on your payment, it will lapse. And, regardless of what you pay into it, when it reaches the end of the initial period, it usually simply ends. Nevertheless, it is better than nothing and may be quite satisfactory to many people. Plus, the availability of a high face value at low cost will mean the survival of your family if you should die.
Is there any way to “save” Term Life?
If you mean, is there a way to continue the policy after the initial term, the answer is Yes. Most policies are convertible to anything else offered by the same company. Frequently, the conversion is just to an annually renewable term—meaning the price will increase yearly until you can no longer keep it—or to decreasing term. With the latter option, your premium stays the same, but the face value decreases annually until the policy expires—usually at age 80 or 85. However, if you think you will want the conversion option in later years, simply choose a company that also offers Universal or Whole life. Usually you will be able to convert all or part of the Term policy to a UL or whole life option. Of course, the premium will be higher, but you will be able to lock in a premium for the rest of your life.
A few perks
Term Life does have a variety of riders available, including spouse term, children’s term, disability waivers, and unemployment waivers. Thus it is possible to insure your entire family with a Term policy now and plan to convert the primary policy to a whole life later on when you no longer need to be responsible for the children. Furthermore, if you should become disabled during the initial term, the company will continue the policy to the last renewable date—again, usually age 80 or 85.
For younger people who need life insurance but simply have their money going into too many baskets, Term Life remains an attractive option. You should, however, speak with a reputable agent so you know what other options the company has. You need to make sure you understand the contract and what choices you will have later in life.