Term Life Insurance

The most basic type of life insurance is known as term life insurance. This insurance provides a monetary benefit to a beneficiary upon the death of the policyholder, and nothing more. Term life insurance pays out only if the policyholder dies within the length of time that is specified when the insurance policy is originally purchased.

Because term life insurance has no cash value, dividends, or interest, premiums are less expensive than the premiums associated with other types of life insurance, including whole life, universal life, and variable life. Term life insurance provides coverage for a specified length of time, generally from one to twenty years; the term life policy is of no value once it is discontinued. A good analogy for term life insurance is leasing an auto; when a car is leased, the driver has use of the car for a specified period of time, and when the lease period ends, the car is returned.

Term life is an affordable life insurance product which is an excellent choice for people who are on a budget or who prefer to use other investment vehicles for saving money. Many term life policies include an option by which they can be converted into a permanent life policy; some even offer a discount on the premiums for the permanent life policy over the first few years following conversion.

The premiums for a term life insurance policy are based on a number of factors; the most important considerations are the age of the policyholder and their current health. Level term life premiums are fixed for the duration of the term, but if a policyholder wants to renew their term insurance when a prior policy has expired, the premiums will rise because the policyholder is now older.

Unlike level term life insurance, annual renewable term life policies have premiums that often change from year to year. With annual renewable term life, the policyholder does not have to qualify each year to renew their insurance, but the premium can and often will be higher than in previous years. The policyholder has the option to renew at the premium rate that is offered, or they can let the policy lapse and shop for term life insurance elsewhere.

While most insurance agents believe in the value of permanent life insurance, many personal finance experts advise that for most people, basic term life insurance is the best choice when it comes to life insurance products.