Term Life Insurance, What Is It
All About |
By Donald Lusan |
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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. |
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