Life Insurance: Term Life Insurance

There are two main types of life insurance, term life and cash value life insurance. You should understand the difference between the two insurance terms before you get a life insurance quote from a life insurance company.

There are also many different policy variations between these two types of life insurance. For this article we will only focus on term life insurance.

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Life Insurance

Term life policies provide life insurance for a specified period of time, usually for 10, 20 or 30 years but shorter periods are also available. The idea is there will be a period of time in your life you will have dependents that will need a source of income if you die.  If you die during the term period, the insurance company will pay the face value to your beneficiary, usually a surviving spouse or your dependents.

If you live beyond the term life insurance period, you do not receive any money. No savings or cash value is built up during the insurance term unlike a cash value life insurance policy. You can get more life insurance coverage with a term life policy than a cash value policy because term life insurance rates are cheaper. The cost of term insurance goes up as you get older, which can make it more expensive than cash value insurance in the long run.

Buying Term Life Insurance

When you buy term insurance, you need to decide how long you want the protection. You may renew the policy without a physical examination for the period of years specified in the policy. Another option is some term insurance can be converted to cash value insurance up to a specified age with no physical examination.

If you do convert some or all of the term life to cash value the premiums for the converted insurance will be higher for the cash value insurance. If you fail to pay the insurance premium for your term insurance, it will lapse without any cash value, as compared to a permanent type of policy that has a cash value component.

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