Term
Life Insurance. What Is It All About?
by: Donald
Lusan What is term life insurance?
You have an interest in buying term life insurance,
that is why you are reading this article, and
you want to know how it really works. Right? Well,
there are many types of term life insurance and
I am going to give you a brief explanation as
to how each one works.
Decreasing Term Life Insurance
Decreasing term life insurance is very popular
with home owners and mortgage companies. The homeowners
want to know that the mortgage is paid off if
they should prematurely die, and the mortgage
company want to be assured that they are repaid
the money loaned to the homeowner. The face amount
of these policies decrease in a uniformed manner
each year as the balance owed on the mortgage
decreases, and the premium remains level. This
is very inexpensive life insurance.
Increasing Premium Term Life Insurance
This is initially the cheapest term life insurance
you can buy. The death benefit remains level for
the duration, however, the premiums increase every
year and as a result this may turn out to be the
most expensive term life insurance you can buy.
If you should purchase this policy it would be
wise to convert to a level plan as quickly as
possible.
5 Year Level Term Insurance
The face amount of this policy remains level
for the entire 5 year period and so does the premium.
Upon death the face amount is paid either in one
lump sum or in the form of an income. If you have
a short term need for life insurance, like covering
a bank loan, then this may be the plan for you.
10 Year Term Life Insurance
Like the 5 year term life insurance policy, the
ten year term life policy can be used to cover
a bank loan, but it can do considerably more.
It can be used for family protection and a myriad
of other needs. The face amount of the policy
remains level for the duration and so does the
premium. Some companies allow you to continue
the policy after 10 years with an increase in
premium.
20 Year Term Life Insurance
The 20 year term life insurance policy is probably
the most popular of term life policies. The death
benefit remains level for the duration and in
some cases so does the premium. With some companies,
however, the premiums increase after the first
10 years to reflect the cost of the additional
risk to which the insurance company is exposed
as the insured gets older. All in all, the 20
tear term life insurance policy is fairly inexpensive
and does the job it is intended to do.
Unlike whole life insurance, universal life insurance
or variable life insurance, term life insurance
does not have cash values or earn dividends. There
is a fairly new type of term life insurance policy,
however, called a return of premium policy which
returns all your premiums at the end of the term
period, if you do not die. The premiums are so
high it may not be worth your while to buy this
type of term policy. |
