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What is Term Life Insurance?
Term life insurance is a type of life insurance that only pays out a death benefit if the policyholder dies within the term of the policy. Generally, most terms last between five and 30 years. Unlike permanent life insurance policies — like whole or universal life — term policies do not accrue cash value.
The Basics of Term Life Insurance
For some, the biggest advantage of term life insurance is cost. Term policies tend to be more affordable than permanent policies, especially for young people in good health. This is because the coverage is temporary and only pays out if the policyholder dies while the policy is in effect. Young people are more likely to outlive a term policy than older people, which means there's a large chance that the insurance company will not have to make a payout. This helps keep term life premiums lower for young people than permanent policies, which eventually will have to pay a death benefit.
Insurance companies usually use medical underwriting to determine whether or not they will sell someone a term life insurance policy. This process also helps the insurer determine the applicant's risk level and decide how much to charge the policyholder for their policy.
It may be difficult for older people and people in poor health to obtain an affordable term life insurance policy. And even if they are able to buy one, the insurance company has the power to charge them more than they would charge a young healthy person for the same policy.
Is Term Life Insurance Right for You?
Term life insurance may be a good fit for you if you fall into any of the following categories:
- You're a parent to a young child
- You're married
- You have debt that would be left to your loved ones if you passed away
- You're a homeowner
- You own a business
- You can't afford the high premiums that come with whole life insurance policies
Term Life Premiums
Term life insurance premiums are usually determined by your age, gender, location, health, and the insurance company you choose to work with. Typically, the younger you are, the less you’ll pay for your premium.
A licensed agent can help determine how much you'll likely pay for a policy based on your unique circumstances. Speak with a licensed agent today at 1-800-966-7169.
To learn more about life insurance, read through our guides below.
- Common Life Insurance Exclusions
- How to Define Whole Life Insurance
- Do I Need Life Insurance If I Have No Dependents?
*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.