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What is term life insurance?
A term life insurance policy lasts for a limited amount of time. This term may be from one up to thirty years. Term insurance is similar to car and home insurance in that if the policyholder does not die during the term of their policy, they will receive no benefit. Such a policy simply provides life insurance and nothing more. This means that the risk to the life insurance company that they will have to payout on a policy is low. Thus, the insurance rate is low. If the life insured dies whilst their policy is in force, a guaranteed death benefit will be paid out to their beneficiaries.
The term of a policy may be set to last until children leave home or until the mortgage has been paid off, or until retirement. As an applicant ages the cost of term life cover will increase. Factors such as poor health, smoking and a risky occupation or hobby will also increase the cost of term life cover.
Certain term life polices may include the option to renew or convert to permanent cover at the end of the term. This is a useful policy extra as it protects a policyholder against the risk of becoming uninsurable. Typically, both options will incur an increase in premium, but will not require a further medical exam. A term life policy may be in joint or single names. Additions such as critical illness, waiver of premium or accidental death may be added to a term life policy.
The premium and death benefit on a term policy are usually fixed but may increase or decrease. A level term policy has fixed premiums and death benefit. An increasing term policy allows a policyholder to increase the amount of cover they have to reflect increases in their income and inflation over time. A decreasing term policy is commonly used for a mortgage protection plan. With such the death benefit will decrease inline with the value of the outstanding mortgage it covers and premiums will reduce accordingly over time.
For those looking for affordable short to medium term life cover, term life insurance is ideal. It provides peace of mind and protection for the most financially demanding times of life. Term life insurance quotes can be found and compared easily online.