Term life insurance is the preferred policy for many people. In some cases when people make a purchase of this policy they do so after much thought and after intensive investigation. Others depend on help from friends or possibly a life insurance agent they know and trust.
Some people, after researching the functions and mechanics of all life insurance policies, decide that term life insurance is best for themselves and their pocketbooks at the given time. They elect to buy a term policy and proceed to buy the selected policy. Each applicant must qualify though.
There are many different term policies. Let us look at each and see what needs these policies most effectively fulfill.
The Yearly Renewable Term Policy
This policy was designed with the express purpose of providing life insurance coverage with minimal initial outlay.
These policies are offered for varying periods of time, 5 years, 10 years and 15 years for example. The death remains level throughout the life of the policy.
Although the premiums are probably the lowest you can pay for your insurance initially they increase every year. As a result these term life insurance policies can become quite expensive eventually.
If you purchase one of these policies you should plan to keep it for a limited period of time, 2 to 5 years for example. If you want to keep your policy longer a 5 year term or a 10 year term would be more economical.
Look at it this way. The yearly renewable policy is really a one year term policy. The insurance company allows you to renew it year after year but at higher cost.
The Decreasing Term Policy
When the actuaries were creating these policies they had mortgage redemption and cancellation in mind. The decreasing term life insurance policy was intended to pay off the balance owed on a mortgage in the event of the death of a breadwinner. The intent was to transfer the home to the heirs free and clear.
The death benefit decreases as the balance owed on the home decreases. The premiums are very low and remains level throughout.
The 5 Year Term Policy
This policy is usually used for short term plans. You have an outstanding loan and you don't want to leave the burden on your spouse, or your business partners, in the event of your death. You have a child or grandchild you want to go through college without financial problems.
While you are alive you know your desires will be fulfilled. You are aware that upon your death your assets will go to take care of other needs. The 5 year term policy may be your answer.
This policy has a level death benefit as well as a level premium.
The 10 Year Term Policy
As the name implies the 10 year level term policy can be kept for 10 years with a guaranteed level death benefit and a level premium. Your actual outlay is a little mote than that of the 5 year term.
This policy is bought for varying reasons. You would own one of these policies if you has a short term need for life insurance coverage or possibly if you wanted to have some life insurance coverage today at a low cost and intend to convert the the policy to a more costly universal life or whole life policy within the 10 year period.
The 15 Year Term Policy
Your youngest child is age 10. You have found yourself in an improved financial situation. You are also aware that you are getting older and could develop some kind of life threatening ailment. You want to make certain that all your children finish school, including college, and are self sufficient even if you don't live to see them graduate. A 15 year term policy could be your answer.
The death benefit remains level for the duration and so does your annual outlay.
The 20 Year Term Policy
The 20 year term policy works similarly to the 15 year term policy but lasts an extra 5 years. This policy has been around for a long time and is probably the most popular term policy, especially among young people. If your children are pretty young then you may want to buy a 20 year term policy. Business people tend to use 20 year term as well as they are usually quite comfortable projecting their growth over a 20 year period.
The 25 Year Term Policy
This policy is probably one of the most ignored policies but if you think about it if you are a newly wed person this may be a good policy for husband and wife. You may plan to have children and will certainly need life insurance for at least 25 years. The 25 year term insurance policy certainly would fit the bill.
The 30 Year Term Policy
Some people like to play it safe. They look ahead and want to know that they will have their life insurance even if they should develop an ailment that would prevent them from acquiring a policy in their later years. They want to know that even though the children are on their own and have become quite self sufficient their spouse would have enough to live on. The 30 year term life insurance policy would fit this persons need.
I hope this page has given you sufficient information to help you make an informed decision as to what type of term policy to buy and why you should buy it.
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