Is Term Insurance Right for You?
Term life insurance or term insurance is one life insurance option out of several. Unlike other types of life insurance, term insurance builds no cash value. It provides coverage for a specified, limited amount of time. This is typically 5, 10, 20, or 30 years. Once this time period is over, an individual may either cancel the policy or pay increasing premiums to continue the coverage. If the insured individual dies during the specified term, the benefits will be paid to the beneficiary. Term insurance is typically the least expensive type of life insurance. The reason for this is that the policy may end without ever paying out benefits. Its primary purpose is to cover the financial responsibilities of the policy holder.
When purchasing a term insurance policy, it is essential to first determine how much coverage that you need. A basic and often used criteria is that you should be insured for approximately ten times your annual salary.
Types of Term Insurance
Straight term or level term is the most common form of term insurance. Your benefits and premiums will remain constant for the duration of the policy. Most straight term policies offer a renewal option.
Another type of term insurance is annual renewable term insurance. This is the most basic form and the duration of the term is one year. The benefits stated in the policy are only paid to the beneficiary if the policy holder dies with in one year. It is difficult to renew an annual policy. If the holder develops an illness or terminal condition during the year term, he or she would probably be considered to be uninsurable and would not be able to renew the policy.
A third type of term insurance is decreasing term insurance. For this type of policy, the protection that you purchase decreases over time. However, your premiums remain constant throughout the term. This type of policy is usually purchased by individual who expect that their need for coverage will decrease over time. An example of this would be a family with children. As the children get older and leave home, the need for insurance coverage will lessen.
When deciding one which type of life insurance is right for you, consider term insurance. It is usually the least expensive type of insurance and may provide adequate coverage for you and your family if you expect your insurance needs to decrease over time.
