There are two types of term insurance:
- Yearly renewable term insurance - Premiums for a yearly renewable term product start out low and increase each year as the insured ages. These cost increases may become prohibitive over time.
Level term insurance - Level term insurance premiums remain constant for a specified period of time such as 10, 20 or 30 years (a choice you make at the time of sale.) When the specified period of time ends, the premiums will increase dramatically.
Term insurance should be thought of as "renting" and should not be considered life-long insurance protection since all term insurance will terminate as some point in time and it will never build cash value. Most employees feel they are insured adequately through group term insurance. This is a false sense of security. The moment a person resigns or retires, most group term insurance will end as well. By that time, you may be too old or no longer insurable to obtain insurance protection for the remainder of your life.
If term insurance expires, it may be renewed but often at a much higher rate than anticipated. If renewing a term policy, you would be subject to underwriting and this could mean a decline or a rating due to your present health, occupation or driving record. Term Insurance often has specific rules about when and how you can renew the policy.
Term insurance can be a great purchase if the protection is only needed for a limited period of time. Often, term insurance policies are sold to younger people with growing families to cover a temporary need such as a mortgage. The advantage of term insurance is that it can provide the highest death benefit for the lowest premium but the product does have its limitations.
Most quality term policies also contain a conversion period which allows a person to convert the term plan to a permanent/whole life policy at a later date. Because of this, it might be wise to purchase term insurance now to lock in your insurability so that you can convert the plan to permanent insurance at a later date when cash flow will allow.
Ask Jeff at Richard Financial Resources, LLC about which term life insurance policy is right for you and your family. Jeff will shop around for the lowest cost quality term insurance your money can buy.
Key Policy Features:
- Low premiums.
- Limited premium guarantee.
- Can be purchased with either level or increasing premiums.
- Various conversion periods.
- Coverage ends after a specified period.
When to Use:
- When you need a low premium.
- When you need temporary coverage.
- When cash value is not important to you.