Understanding Term Life Insurance
Term Life Insurance is exactly what it sounds like. It’s a life insurance policy at a fixed rate of cost for a limited period of time, or “term”. Once this term ends, the policyholder may have the option to renew it for another term, convert the life insurance policy to permanent coverage (whole life insurance) or simply allow the policy to terminate. Typically, Term Life Insurance policies last 10, 20 or 30 years. Some life insurance carriers offer an additional 5 or 10-year term increments. It may even extend it up to 35- and 40-year terms. However, know that the cost will increase, substantially, if you extend past the term end date. Sometimes the cost can be 10-20 X higher than what it is during the 10-30 year term period. This increase in cost is simply not sustainable for most people. We advise most clients to only continue past the term end date if you have been recently diagnosed with a terminal or otherwise severe medical condition.
An Example of How Term Life Insurance Works
A 30-year term policy covers you for 30 years from the date of policy purchase (As long as you keep paying the premiums, of course). Naturally, a 30-year term is going to cost more than a 10-year term, as the life insurance company is committed to 20 more years of your life/health. Term Life Insurance is full coverage- meaning it pays your beneficiary, upon your death. They pay for accidental, as well as medical deaths. Usually, people purchase Term Life Insurance to cover their cost of living for their families after they pass away. Term life insurance is also a great way to pay off the mortgage, or simply transfer wealth to your loved ones, tax-free.
Other Benefits of Term Life Insurance
Term life insurance is NOT an investment. The benefit is only paid out upon death. Or, in many cases- the insured will be paid while living- if they receive certain medical diagnoses. If you become terminally, critically or chronically ill, most insurance companies will send you 75% – 100% of your entire policy! That means if you were to get a $200,000, 20-year term life policy and a couple of years later your doctor says you have terminal cancer, you can call up the insurance company and they will send you $150,000-$200,000 (depending on which plan you choose). These are called “Living Benefits.” Living Benefits are by far one of the most important benefits of Term Life Insurance. Term Life Insurance provides peace of mind and secures financial protection for you and your loved ones.
However, if you become terminally, critically or chronically ill, most insurance companies will allow you to access 75-100% of your entire policy! That means if you were to get a $100,000, 20-year term life policy and a couple of years later your doctor says you have terminal cancer, you can call up the insurance company and request they send you $75,000-$100,000 cash (depending on which plan you choose). Either way, you have what is called “Living Benefits.” Living Benefits are by far one of the most important benefits of Term Life Insurance.
Who Qualifies for Term Life Insurance?
The eligibility criteria for a Term Life Insurance Plan varies, according to the life insurance companies. The minimum age is 18 years and the maximum age is usually 65 years, with exceptions up to 85. The price typically gets quite steep, past age 60, depending on the amount of insurance coverage and your health. Term Life Insurance is oftentimes used to pay off a mortgage, or used as income replacement. You’re usually going to qualify for Term Life Insurance if you have fewer than two active prescription medicines. There are a lot of great reasons why someone would utilize a term policy. It’s a wonderful policy and it tends to be an economical route because of the expiration date. Please use the links below or call us directly at (928) 323-0933, for more information or a free consultation