We have all seen life insurance commercials and you have probably heard of term and whole life policies. Term life is quite similar to your homeowner or auto insurance policy. You pay premiums and will use the policy only when needed. If there is no claim, the insurance has been purchased and the money will not be returned. This same principle applies for term life – you pay a monthly premium for a specified period of time. Depending on which insurer you are looking at, there may be three types of term life insurance available. These types work exactly as the name describes.
Annual Renewable is good for only one year. Since the likelihood of dying within that specific time frame is low, this is an unpopular type of policy. Another negative for this type is the potential lack of insurability for the next year.
Level Term Life. The most common terms will be one, two, or three decades with a level rate across the entire period. As already stated, if there is no claim against the policy, death of the insured, the money invested over the years is gone. This would be the most popular and economical type of life insurance.
Return Premium. As the name implies, a portion of the premiums are returned if the insured lives past the specified period. Although the money invested is not completely lost, the premium amounts tend to be higher for this type of insurance.
How old are you? Let's say that you want to purchase a $250,000 20-year level term life insurance policy. If you are a 40-year-old non-smoking male, you can expect to pay around $37 per month. Your total investment in this policy would be less than $9,000. That sounds like a pretty good deal!
How is your health? The underwriters for most insurance companies will examine everything from medical history and occupational risks to motor vehicle records and hobbies. Your actual premium rate will be based on their discoveries. Remember that insurance companies cannot make money if all of their customers are in a high-risk bracket.
We all need life insurance. Whether it is for coverage of our own debts, support for a significant other, or education for our children; this type of provision could be considered a necessity. Term life insurance can grant peace of mind for young working families. Aren't those smiles priceless?