What Is Term Life Insurance, And What Are The Benefits Of This Type Of Policy?

Term life insurance is one type of life insurance. Term life is coverage which is only valid for the term of the life insurance contract. There is no cash value with these policies, unlike many of the other life insurance types. This insurance offers many benefits, and one of these is the lowest prices and rates out of almost all life insurance coverage types. When you purchase term life insurance, you and the insurance company enter into an agreement to provide you coverage for a specific term, the length of the agreement, for a specified premium each month or year. If you expire during this term, the life insurance company pays the face value of your policy to your beneficiaries as long as your demise was due to a covered event and your premiums are up to date.

Term life insurance, just like every other insurance type, has certain exclusions which are not covered. Many life insurance providers require a form which has numerous questions about your occupation, activities, and hobbies, and your premiums are based on an assessed risk according to your answers, among other factors. If you engage in high risk activities or work in a high risk occupation you will have higher rates than people who do not. If you are a commercial pilot, or you fly planes as a hobby, you are at a higher risk for death than an accountant or lawyer. Your premiums are based on your risk factors, and the more risks you take the higher these premiums will be.

Term life insurance offers better life insurance costs than other types because if you expire after the policy term has ended there is no benefit. Two types of term life insurance available are annual renewable term life insurance and level term life insurance. Annual renewable term insurance is contracted for a period of one year, but there is a guarantee that the policy can be renewed every year for a specific time period, usually from ten to thirty years.

The renewable term may rarely be offered until age ninety five. Every term the premium rises to reflect the age of the insured. Level term life insurance is a more common type of coverage, and the premium for this coverage stays the same each year for the specified number of years. Common lengths for this type of life insurance can be ten years, fifteen years, twenty years, or thirty years, and during this term your premium will never go up. The length of years included in the term determine the final cost of the premiums, because the risks for all the years involved in the term are factored in and averaged. The premiums for a thirty year level term life insurance policy will be much higher than the premiums for a five year level term life insurance policy, because the risks of you expiring in the next five years is much smaller than the risks of you expiring in the next thirty years. Insurance premiums are based on risks, no matter what type of insurance it is, and life insurance is no different.