Term life insurance is by far the simplest form of life
insurance. Term life insurance is simply that, insurance
for a term or specific period of time. It pays a benefit only if
you die in the designated period of time. On the downside, it
pays nothing if the policy expires before you die. It is often
referred to as temporary life insurance.
Policies generally last for 5, 10, 15, 20, or 30 years. Many
policies are convertible, which means that you have option of
switching to a permanent life policy. The main advantage of a
term life policy is that they generally have lower premiums.
They are good for covering needs that may disappear in time,
such as car or mortgage loans.
They also have some distinct drawbacks. Premiums generally
increase with time. This means that you will be paying
considerably more in your later years, when your need for
protection is generally lower. Another factor to consider is
that your coverage may expire at the end of your term, leaving
you with nothing to show for your investment. You are
essentially back at square one.
Insurance agents often recommend that customers switch term
companies every couple years, in order to take advantage of
promotional pricing. One should be mindful of doing this, as you
will be subject to a new contestability period. A contestability
period is normally two years. If you die during this period, the
insurance company will likely review the statements you made on
your application. If you have made any inaccurate or incomplete
statements, the insurance company will likely refuse payment.
Life insurance is no laughing matter. When you are considering
purchasing life insurance, please do some research first. Spend
some time considering questions, and pose them to a trusted
insurance broker. Be especially wary of purchasing insurance
from a door to door salesman, as they are likely trying to sell
term life insurance which may or may not suit your needs. After
all, it is your hard earned money that is being spent. And it is
the well being of your family that will be impacted by your
decision.
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