Why choose Term Life Insurance?

By Compuquotes Team on October 15th, 2009

Perhaps the simplest form of life insurance, term life provides temporary coverage at an affordable rate for a variety of needs. Consumers choose term life policies over whole life based on a number of factors. Here's what term life insurance is and why term life may be the right choice for your specific situation.

What Is Term Life Insurance?

Term life insurance is precisely as the name implies. It's a life insurance policy that provides death protection for a stated time period, or term. Term life can be constructed for varying lengths--both short and long term. One of the reasons term life is so popular is that it can be purchased in large amounts for a relatively small initial premium. The typical period lengths for term life insurance include 5, 10, 20, and 30 years. Some insurers offer an even broader selection of terms.

Features of Term Life Insurance

Term life is different from whole life insurance in several areas. It is these features of term life that make it attractive to those with short-range goals to consider. Here are a few characteristics of term life that you should know before buying:

• Adjustable Premiums. Premiums may rise or fall based on projected changes of investment earnings, mortality experience, persistence, and expenses.
• Convertibility. Policies are convertible from term policy to permanent policy types up to age 75 in most states.
•  Renewability. The policyholder can continue coverage past the original coverage period of the policy with a premium increase.
• Accelerated Death Benefits. you can purchase a rider that allows you to collect a portion of your benefits while still alive if you are diagnosed with a terminal illness.
•  Disability Waiver of Premium. This rider waives premiums when you suffer a disability lasting six months or longer.
•  Accidental Death Benefits. You can purchase a rider that doubles or triples your benefit in the case of death by accidental means--so your benefit can increase when you are younger and more likely to die in an accident than from illness.

When to Buy Term Life Insurance

Term life is a short-term solution that can be terminated when the need for it goes away, and increased when the need is greater. Here are a few of the lifestyle changes that may prompt you to consider purchasing term life insurance.

• Making Significant Purchases. Buying a new home, new vehicle, or other "major" purchase that would leave your heirs in a bind should you pass away should prompt a review of your insurance situation.
•  Extra Protection for Child-rearing Years. Adding coverage is appropriate for parents on a tight budget who require solid protection for their children.
• Covering College Tuition. With the cost of four years of college at 30,000 or more, term life can ensure that your children finish school.
The Life and Health Insurance Foundation for Education, a nonprofit organization dedicated to helping consumers make smart insurance decisions, recommends term life for its return-of-premium option. According to LIFE, for a 20 to 30% premium, your insurer will refund the payments you made over the life of the policy. To take full advantage of this benefit, you must keep the policy in force for its entire cycle.

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