Term Life Insurance Facts

In general Term Life insurance is the most inexpensive type of life insurance coverage available and usually offers the largest coverage amount for the premium cost. It is designed to provide coverage for a specific period of time and usually has a coverage period of 5-30 years. Guaranteed level term life insurance, which is the most common type of coverage, provides a guaranteed level death benefit along with a guaranteed level premium cost.

An individual’s need for coverage usually dictates the period of coverage chosen. The death benefit chosen is usually determined by financial obligations like a home mortgage or need for future funds in the event of death. Examples of future needs would be replacement of future income or college education needs. In the event of the death of the insured individual the beneficiary would receive the death benefit (insurance coverage amount). In addition, most term life insurance plans have many optional benefits available like money back riders (Return of Premium), spouse and child riders, and accelerated death benefit riders.

Perhaps one of the greatest values in life insurance today is the Return of Premium rider will provide a guaranteed refund all of the premiums you have paid on your term policy plus any optional riders, minus any benefits that may have been paid during the policy period. If no benefits have been paid during the policy period, you will receive a full refund of all premiums you have paid at the end of the policy term, Guaranteed. If the policy is canceled before the initial term period the refund will be prorated based on the length of time the policy has been in force. Generally a detailed prorated schedule is included in all policies.

Most Financial Advisers recommend at least 10 times your annual income for your life insurance coverage. In addition, if you have financial or business obligations, dependents, or anticipated future needs the amount may be as high 20 times your annual income

Choosing a level term period is an individual choice, although depending on somebody’s age, some level term periods may or may not be available. The factors involved in choosing a term period are as follows: how long is the coverage needed? Is there a possibility that the coverage will be needed longer than you think today? Many people feel that currently coverage is needed for a certain amount of time. However, future needs are often hard to foresee.

We recommend choosing a level term period that makes sense now, but in the future. If you are unsure if your needs will change, we may suggest a longer-term period. In addition, a longer level term period may have a minimal increased cost, making the longer period more attractive for a fractional difference in cost. An example might be, you think you may only need a 20-year level term, but a 30-year term is only a few dollars more per month.