What is term life insurance? It is important to understand the differences involved in the many life insurance plans and policies on the market. Term life insurance covers the insured person for a specific period of time and pays a death benefit only if the insured dies during the term the life insurance policy is in force. Unlike whole life insurance, term insurance does not build up a cash value.
If you have asked yourself 'what is term insurance' because you are determining the needs of you are your family and their financial future, you aren't alone. The world of life insurance can be a very confusing place. The more information you have the better decision you can make.
If a term policy expires before you do you receive no pay out and will need to pick up another term plan. Typically, term life insurance is offered in 5-year increments, up to a maximum of 30 years. A few insurers also offer annually renewable one-year policies. Because of these restrictions on time and the lack of cash value benefit term policies are very affordable and therefore very popular.
A term life insurance policy can have a full guaranteed rate feature that will keep the premiums to the same cost over the life of the policy. Some polices, however feature variable rates in return for a lower premium. Most insurance plans offered through your employer are considered term insurance plans. You cannot take them with you, although while you are employed you can receive a substantial savings on the insurance premiums. It is wise to consider a term life insurance policy that is purchased outside of employment that you can maintain no matter what job you go on to.
Most insurers (such as MetLife) require a medical exam for any type of life insurance and may even require it when renewing an expiring policy. If you are 70 or over your chances for being allowed to extend a new term life insurance policy are very slim. The most important thing to consider in choosing the right term life policy is to compare rates. They can vary by as much as 50% from insurance carrier to insurance carrier.