What is Term Life Insurance?
Term life insurance can generate a huge “bang-for-your-buck.” You choose the amount of coverage desired, and as the name implies, you can choose the period of time you wish to guarantee the initial premium – e.g. a term of 10, 15, 20, 25, or 30 years. A term life insurance policy will give you a much higher death benefit for the same premium than permanent life insurance because it is only guaranteed for the term you select. Check out our section on whole life versus term insurance for more information.
What happens when the term period expires?
Once the term has expired, the term insurance will change to annually renewable term insurance with premiums increasing each year based on your age. The cost for renewing a life insurance policy on a yearly basis after the term expires becomes very expensive. Therefore, you want to try to purchase the guarantee for the full length of time the coverage is needed from the beginning.
If I buy a shorter-term policy now, can’t I just buy another policy later if I need it?
Many people consider purchasing a shorter term policy to keep their premiums at a lower level with the objective of re-applying later to extend the coverage further into the future. This idea may sound good in theory, but in reality there a few things that need to be taken into consideration. Purchasing a new policy when you are older will be more expensive simply because of a higher age. The difference in annual cost for someone age 30 vs. age 35 is minimal, while the difference in annual cost between age 60 and age 65 can be very significant. Of course, you must also consider your health. When you are 35 or 40 years old, you may be in perfect condition and can qualify for the best life insurance rates. As you get older, you start receiving treatment for more complicated high risk life insurance conditions (blood pressure, cholesterol, diabetes, heart functions, etc.), and you may be subjected to tougher underwriting resulting in a lower risk classification, which increases your premiums.
What is a conversion option?
Most highly rated life insurance companies have an option to convert term life insurance to permanent coverage based on the original risk classification when the policy was issued (the risk classification determines the premium). This can be an excellent option for someone whose health history has declined while the policy is in force. The cost of the conversion is based on the age at which the policy is actually converted. As an example, if the policy was purchased at age 40 and converted to permanent coverage 15 years later, the premiums paid would be set based on the attained age of 55. The earlier a policy is converted, the less expensive the annual premiums will be.
How can I get an Instant Quote for Term Life Insurance?
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