How Long Is Term Life Insurance?

Term life insurance is a contract between the policy owner and an insurance company, where the owner pays a premium for a specified term, and the insurance company pays a death benefit to the beneficiary upon the insured’s death. When shopping for term life insurance, there are several things to consider:

Application Process

Before getting a policy, the insurance provider assesses how much of a risk you are to insure through a process called underwriting. They will typically ask for a medical exam to evaluate your health and want to know more about your occupation, lifestyle, and hobbies. Depending on the results, your rates may increase.

Term Length

One of the most important questions to ask yourself is how long you need coverage for. It is usually better to get a longer-term policy than a shorter one because it is easier to get insurance while you are younger and in good health.

Death Benefit

Consider the amount of coverage you need to care for your family’s needs if you are not there to support them. A recent survey found that life insurance is often believed to be more expensive than it is in reality.

Beneficiaries

Decide who gets the benefit when you die. Beneficiaries are typically family, but they do not have to be. You could choose to leave some or all of your benefits to a trust, a charitable organization, or a friend.

Convertibility

Look for an insurer that offers the option to convert from term to a whole life policy without taking another medical exam, which would likely increase your cost.

Renewal

When your term life policy ends, you either have to buy another policy at a higher cost or go without life insurance. However, if your policy has a guaranteed renewal clause, you can renew at the end of your term on a year-by-year basis, but at a higher rate.

Term life insurance does not have a cash value component, unlike whole life insurance policies. When shopping for a policy, compare insurance rates from a few different sources and consider the company’s reputation and customer reviews. Talk to an experienced professional to guide you through the process of calculating your actual need and the best ways to meet those needs within your budget and types of life insurance policies available.