What is Term Life Insurance?
Term life insurance is the simplest, lowest cost life insurance you can buy, with lots of flexible features. There is no cash value in this type of policy. Whole and Universal Life Insurance insurance carries cash values but are much more expensive. The largest number of income earners require income protection in adequate amounts. A rough rule of thumb is to purchase between 8 to 12 times your income. A much better way to calculate your needs is through a financial needs analysis.
Life insurance can best be described as a plan to provide financial protection for those you care for and are financially responsible for in the event of your death. The insurance company agrees to pay your beneficiaries a specified amount of money when you die. In order to keep the policy in force, you are required to make periodic payments called premiums. The cost of your premiums depend on several factors including your age, health, amount of coverage, and medical background.
The money that is paid out to your beneficiaries is called the death benefit. This money is tax free and can be used to pay off debt, educational expenses or could be invested so the beneficiary lives off the income from the investment, thus preserving the capital.
Term Life Insurance is guaranteed to remain the same cost for the term (years) you choose. Choose from 5 to 100 years. A term to 100 Life Insurance Policy will have the same premium to age 100. The 5 to 25 year Term Life Insurance Policies I market are guaranteed renewable and convertible. The most popular term Insurance plan is a 10 year renewable and convertible policy. That means that even if your health changes during the length of your initial term, the Life Insurance Company will renew your coverage for additional terms usually to age 75 to 80 years of age. However, your premium will increase on renewal compared to a Term to 100 policy. Term Life Insurance can be exchanged ( converted), at the option of the policy owner and without evidence of insurability, for permanent term to 100 insurance in the majority of cases (a few policies are non-renewable after maturity) up to usually 65 to 70 years of age. BW
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