Term Life Insurance
Term life insurance is the simplest type of life insurance plan. Unlike whole life insurance and universal life insurance, term life is not a permanent life policy. It is only good for a term or a period of time and therefore can be easily compared to renting or leasing. So while you pay your premiums to protect your beneficiaries for a term, usually 10, 15, 20 or 30 years, at the end of it if you are still alive, all the premiums you paid are gone. But term life insurance is the least expensive kind of life insurance coverage you can get to protect your loved one.
Facts about Term Life Insurance
- Temporary Coverage: Term life insurance provides coverage for a specific period, typically ranging from 10 to 30 years, known as the “term” of the policy.
- Death Benefit: If the insured individual dies during the term of the policy, a tax-free death benefit is paid out to the beneficiaries named in the policy.
- Affordability: Term life insurance is often more affordable than permanent life insurance policies like whole life or universal life insurance. This makes it an attractive option for individuals seeking basic coverage without cash value accumulation.
- Renewability: Some term life insurance policies offer the option to renew the coverage at the end of the initial term, typically at a higher premium rate. However, renewal terms and premiums may vary depending on the insurance company and policy.
- Convertible: Many term life insurance policies offer a conversion option, allowing the policyholder to convert the term policy into a permanent life insurance policy without undergoing a medical exam. This can be beneficial if the insured’s needs change over time.
- Level Premiums: Term life insurance policies often come with level premiums, meaning the premium remains the same throughout the term of the policy. This can help with budgeting because the premium won’t increase each year.
- No Cash Value: Unlike permanent life insurance policies, such as whole life or universal life insurance, term life insurance does not accumulate cash value over time. Once the term ends, the coverage typically terminates, and there is no payout or cash value.
- Coverage Flexibility: Term life insurance policies allow policyholders to choose the coverage amount and term length based on their individual needs and financial circumstances. This flexibility makes it easy to tailor the policy to fit specific life stages or financial obligations.
- Income Replacement: Term life insurance is often used to provide income replacement for loved ones in the event of the insured’s death. It can help cover expenses like mortgage payments, debts, education costs, and daily living expenses.
- Medical Underwriting: Applicants for term life insurance typically undergo medical underwriting, which involves answering health-related questions and may require a medical exam. The premium rate is often based on factors such as age, health status, lifestyle, and coverage amount.
Life Insurance Quotes
| MALE | AGE: 35 | RISK CLASS: SUPER PREFERRED | NON-SMOKER | |
|---|---|
 | Real-time Life Insurance Rates Face amount: $1000,000 |
| 10 Years Term (convertible to guaranteed universal and whole life) | $19 monthly |
| 20 Years Term (convertible to guaranteed universal and whole life) | $34 monthly |
| 30 Years Term (convertible) | $64 monthly |
| 30 years Refund of Premium Term | $132 monthly |
| Universal Life (pay only till 65) (Lifetime of coverage without cash values) | $583 monthly |
| Whole Life (pay only till 65) (Lifetime of coverage with cash values) | $1,446 monthly |
| Please note: The rates quoted are estimates and are subject to underwriting by the insurance carrier. Rates do not include optional riders. For a no-obligation consultation, call us at 1.866.526.7264. |
| FEMALE | AGE: 35 | RISK CLASS: SUPER PREFERRED | NON-SMOKER | |
|---|---|
| Real-time Life Insurance Rates Face amount: $1000,000 |
| 10 Years Term (convertible to guaranteed universal and whole life) | $16 monthly |
| 20 Years Term (convertible to guaranteed universal and whole life) | $28 monthly |
| 30 Years Term (convertible) | $51 monthly |
| 30 years Refund of Premium Term | $102 monthly |
| Universal Life (pay only till 65) (Lifetime of coverage without cash values) | $502 monthly |
| Whole Life (pay only till 65) (Lifetime of coverage with cash values) | $1,043 monthly |
| Please note: The rates quoted are estimates and are subject to underwriting by the insurance carrier. Rates do not include optional riders. For a no-obligation consultation, call us at 1.866.526.7264. |
Term Life Insurance is Renewable and Convertible
Most people buy term insurance because they have a mortgage to protect, young children, some loan or simply because they could not afford or find value in a permanent life insurance plan. The premium of your term life insurance plan remains the same during the duration of the term.
It is almost impossible for most people to renew their term policies at the end of the term. It is simply because renewing is way too expensive an option and in most cases a bad idea. However, the conversion option in a term life insurance plan is something that later in life goes in your favor. This option allows the insured to convert a term life plan to a permanent life (universal or whole life) without having to re-qualify medically. So, as an example, if you buy a term insurance today and 10 years down the lane you suffer a heart attack, you will not have to explain anything to your insurance carrier to convert your policy. All you will do is to sign a new form and pay a higher premium based on the kind of universal or whole life plan you select.
It is important to note that you don’t have to convert the entire face amount of your term policy. You can do a partial conversion as well.
Hardly anyone renews a term insurance. But almost everyone wants a convertible term life insurance.
There is also another option in Term life. It is called Return of Premium Term (ROP), which costs more to get the same coverage. But at the end of the term instead of losing all the premiums to the insurance carrier, the insured walks away with a refund of all premiums minus any loans.
Comparison of Cost between Traditional Term and Return of Premium Term
A 45 years old male can obtain a traditional 30-year term coverage of $500,000 for only $82.69 per month. At the same preferred plus, non-smoker risk, the return of premium term will cost him $179.96 instead.
So, in the first option, you end up gaining protection for your loved ones for a total of $29,768.40 over a period of 30 years. In the second option, you spend $35,017.20 more to get the same coverage. The main difference is that under the return of premium life insurance option, at the end of the term you will walk away with a refund of $64,785.60. And ladies, yes, you always pay less premium because according to mortality index you tend to live longer and the actuaries favor you while establishing premium charts.
Single Premium Term Life Insurance
- Your first premium will also be your last.
- The term policy will never lapse due to lapse in premium.
- It turns out to be a less expensive option.
What are Life Insurance Riders
Free and Optional Riders (subject to carrier, age and state availability)
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- Terminal Illness Rider or Accelerated Death Benefit Rider(ADB)
Most term life insurance plans almost always come with a free rider. It comes to your rescue if a medical doctor diagnoses you with a terminal illness and gives you only between 12 months to 24 months (depending on the state) to live. ADB rider lets you have a portion, usually up to 75% of the death benefit while you are still alive. You can use this amount whichever way you like.
- Terminal Illness Rider or Accelerated Death Benefit Rider(ADB)
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- Waiver of Premium Rider
This rider comes at a cost and provides a waiver of premium if you become totally disabled. It covers you for a certain number of years. If you decide to add this rider to your life insurance policy, please make sure to understand it completely.
- Waiver of Premium Rider
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- Accidental Death Benefit Rider or Double Indemnity Rider (ADB)
This rider can pay up to double the face amount of the original policy if the death occurs due to an accident. Death during an act of war, illegal activities or death due to a self-inflicted injury is not covered. Please check all the limitations before taking this rider.
- Accidental Death Benefit Rider or Double Indemnity Rider (ADB)
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- Child Term Insurance Rider
This coverage allows the parents to purchase small amounts of life insurance for their kids without any hassle. The ages covered are typically between 15 days to about 18-21 years, depending on the carrier. One of the benefits of this rider is that it is relatively inexpensive and covers all kids in the house for a small premium. Many carriers allow conversion of the face amount of this rider for up to 5 times the original coverage at the time when the kid matures without any underwriting involved.
- Child Term Insurance Rider
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- Critical Illness Insurance Rider
A few term life insurance plans offer critical insurance rider. The three primary critical illnesses include cancer, heart attack, and stroke. Other conditions may also cover such conditions as:
Heart transplant
Coronary bypass surgery
Angioplasty
Kidney (Renal) failure
Major organ transplant
Paralysis
It is usually not the illness that destroys a family but the bills do. Critical Illness Rider offers tax-free proceeds in a lump-sum when needed and you can use it whichever way you like. It does come with a limitation of state and age availability.
- Critical Illness Insurance Rider
- Long-Term Care Rider
A Long-Term Care rider covers care and services in case you are unable to take care of the “basic activities of daily living,” such as getting dressed, getting in and out of bed, using the bathroom, bathing, and grooming, eating, and walking, among other activities due to disabling physical, or cognitive conditions. The form of care can also include in-home care, nursing home care, adult day care, and long-term care facilities, among others. Always ask your insurance adviser on the availability of riders before you take a life insurance policy.
Also, learn more about Whole Life Insurance and Universal Life Insurance.
