Term insurance is a form of life insurance which provides coverage at a fixed rate of payments for a limited period of time. After that period expires, you can renew your policy, up to age 95. However, premiums will be much higher and will continue to rise as you age and coverage is no longer guaranteed and the client must obtain new coverage/a new policy. If the insured dies during the coverage period, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase substantial death benefit coverage.
Because Term Insurance is a pure death benefit, its primary use is to provide coverage of financial responsibilities, for the insured, i.e. mortgage, college, debt or funeral costs.
What term lengths are available?
Depending on your age, level term life insurance protection is available for 10, 15, 20 and even 30 years. One year term is also available for shorter temporary insurance needs.
How do I know what term to select?
Every situation is different. But to help you decide, consider the number of years you have left on your mortgage, or if you have children, consider the number of years until they complete college. If you have young children and plan to send them to college, you may want to consider at least a 20 year term life policy.
Can I convert my policy from term to permanent?
Yes. If your needs change, you can convert all or some of your term coverage to a permanent policy – without a physical and with no medical questions.
Reasons for converting to a permanent life insurance policy.
- If you accumulate or inherit significant wealth and need to plan for taxes and estate settlement costs.
- If you take on debt later in life to pay for a child’s or grand child’s college education or to buy a vacation home.
- If you want to maintain protection and build tax-advantaged cash value within your policy to supplement your retirement income.
Can I renew my term life policy after the initial term expires?
Yes, you can renew your policy after the initial term expires, up to age 95. However, premiums will be much higher and will continue to rise as you age. If you anticipate needing coverage beyond the initial term, consider buying permanent life insurance instead, or converting to permanent life insurance.
Other types of insurance to consider:
Permanent life insurance is where the policy is for the life of the insured and the policy accumulates cash value.
Whole life insurance policy which provides both a death benefit and a cash value component. The policy is designed to remain in force for a lifetime and premiums stay level and the death benefit is guaranteed.
Universal life insurance for permanent coverage flexibility and less emphasis on cash value
Variable universal life insurance for permanent coverage and potentially higher cash value through investment options.
Disability insurance is designed to replace a percentage of earned income if accident or illness prevents the beneficiary from pursuing his or her livelihood.
Long-term care insurance is a policy that pays some or all costs of nursing home care for qualified insureds. Premiums are based on the age of the applicant and are projected to remain stable for the life of the policy. Premium payments stop when the insured meets the qualifications for long-term care, which include medical necessity, cognitive impairment, and inability to carry out certain activities of daily living. Group policies are available.