All About Term Life Insurance

All About Term Life Insurance by Sarah Martin
Term life insurance is one of the types of life insurance policies you can purchase. This type of life insurance will only pay the amount of the policy to your beneficiary if you die during the term specified in the policy, which could be between one and thirty years depending on the length of term you choose. It is the simplest form of life insurance in that you choose the amount of life insurance you need and make the annual premiums for each year of the term. If you are still alive at the end of this term, then this policy is no longer valid and you have to take out another policy for another term.
Within term life insurance there are two types of policies - level term and decreasing term. Level term is the most commonly purchased policy because it pays out the same amount when you pass away at any point during the term. The term lengths you can choose from are:
• yearly, which means you renew the policy on an annual basis
• 5 year renewable term
• 10 years
• 15 years
• 20 years
• 25 years
• 30 years
• a policy that lasts until you reach a specific age, which is usually age 65
Of these, the 20 year term life insurance is the most popular. Your age is a determining factor though, because if you take out life insurance at age 65, very few insurance providers will provide you with a policy beyond the age of 80, so this would shorten the term.
When choosing a term life insurance policy, a renewable policy is really something that you need to look for. With this type of policy, when the term ends, you have the option of renewing it for another term. This is important because by this time you may have medical conditions that would make it hard, if not impossible, to take out a new policy. When your policy is renewable, you will be able to renew it without any problems in spite of these medical conditions.
The premium that you pay for term life insurance depends on several factors. Your age is one of these factors. The younger you are when you purchase a policy; the cheaper it will be because there is not big likelihood of you passing away at an early age. Your lifestyle also factors into the cost as well. If you smoke, drink alcohol excessively or take drugs, your premiums will be higher than that of a person who does not.
You will have to pass a medical check by a doctor to ascertain that you are in good health as well, unless the company offers no medical exam life insurance. Your occupation will play a part if you work in a field classified as dangerous, such as working in a mine. This is because there is a greater possibility of you being killed on the job.
The premiums will remain level for the length of the term. In a renewable policy, the premiums increase at the time of renewal. For example, in a five year renewable policy, you pay an annual premium that stays the same for the first five years and then the rate increases for the next five years.
The reason that level term insurance is more popular than decreasing term insurance is that the amount paid to the beneficiary remains the same throughout. With decreasing term insurance the amount of the payout decreases each year of the policy, which means that if you pass away about a month before the end of the term, there is no money left in the policy to pay to your beneficiary.