Term Policies provide life insurance for a specified period
of time. This period could be as short as one year or
provide coverage for a specific number of years such as 5,
10, 20 and 30 years. If you die during the
term period, the company will pay the face value to your
beneficiary. If you live beyond the term period you had
selected, no benefit is payable. As a rule, term policies offer a
death benefit with no savings element or cash value. If you
have a limited amount to spend, and only need insurance
for a specified period of time, you may be able to get
more coverage by buying term insurance than by buying
cash value insurance. Keep in mind that the cost of term
insurance increases as you get older, which may make it
more expensive than cash value insurance in the long run.
Today’s term policies usually have two sets of premiums:
guaranteed maximum premiums and current premiums.
Current premiums are usually much lower, but they can be
changed by the insurance company. The insurance company
cannot increase the current premium above the guaranteed
maximum premiums shown in the policy. When you buy
term insurance, you need to make a choice as to how long
you want the protection. You may renew the policy without
a physical examination for the period of years specified in the
policy. Some term insurance can be converted to cash value
insurance up to a specified age with no physical examination.
Premiums for the converted insurance will most likely be
higher than the premiums you would be paying for the
term insurance. If you do not pay the premium for your
term insurance, it will generally lapse without cash value,
as compared to a permanent type of policy that has a cash
value component.