Term Life Insurance

A Term Life policy provides coverage for a set period of time.  Terms of anywhere from 1 to 30 years may be written.  During the coverage period, premiums are paid and the death benefit is payable if the insured dies.  There is no cash value built.  This is one reason term life policies are less expensive than whole life.  At the end of the policy term, the coverage simply ends.  There are a few options available at the end of a term policy which will be discussed below.  The type of term policy offered by InsurancePoliciesOnline.com is a level term product.  What this means is that the premiums are guaranteed to remain level for the entire term of the policy.  There are some term products which only offer level premiums for the early portions of the term with future premiums increasing every year.  

Premium & Rates

Life insurance premiums are determined based on age, sex, smoking habits and health conditions.  Life insurance rates are based on statistics associated with life expectancy.  Based on those factors, the insured is placed into a rate class.  The appropriate rate is then multiplied by the selected limit of insurance to determine the premium.  The longer the term of the policy, the higher the premium.  Regardless of changes in health during the policy term, the insurance company may not cancel coverage.  The only way for the policy to be canceled is for non-payment of premium.

A few terms and conditions are important to understand when setting up a life insurance policy.  

Face Amount - This is the death benefit payable under the policy.

Beneficiary - The person to whom the death benefit is payable.  There may be more than 1 beneficiary assigned.  A trust, business or charity may be named as a beneficiary.  A contingent beneficiary may be named who will receive the death benefit in the event that the primary beneficiary is deceased. 

Owner - Each policy is assigned an owner.  The owner has control over making changes to the policy, including naming beneficiaries, and is responsible for premium payment.  The selection of an owner is an important consideration.  It is largely dependant upon the intended use of the policy.  For a personal policy, the owner is commonly a spouse.  For a Key Man or other business use policy, the owner may be a partner.  Consult with your tax or legal consultant to properly select an owner.

Re-Entry - Most term plans allow for a re-entry qualification at the end of the initial guarantee period.  Re-entry requires evidence of insurability.  The insured will then be eligible for the same premiums as if the policy was newly issued.

Conversion - Conversion allows an insured to convert their term policy into a whole life insurance policy.  It must be elected prior to the 20th policy anniversary or before the insured's 70th birthday.  This is a useful feature if the insured becomes severely ill.  It gives guaranteed availability of insurance when their health conditions may prevent them from qualifying for a new policy.

Accelerated Death Benefit - ADB may be included as a policy rider in states where it is improved.  The rider provides for the advance payment of up to 25% of the death benefit if the insured becomes terminally ill with a life expectancy of 12 months or less.