Life insurance is a wonderful product.
It has been with us for a long time and has provided security for so many people.
Term life insurance is arguably the purest form of life insurance.
The average insurance buyer probably recognizes term insurance because of its reputation for being the least expensive of all the life insurance policies.
The public has surely caught on to this aspect but is sometimes hard pressed to define the product that they purchase.
How do you define term life insurance? The name itself actually defines the policy.
Term indicates a definite time period.
Term also tells us that there is a date in time when the policy terminates.
Term life insurance provides protection for a defined period of time and then terminates.
That definition about sums it up.
What do term policies look like? 1.
Decreasing Term - This type of term policy provides protection over a stated period of time.
The initial face amount of the policy will decline over that stated period of time.
Mortgage term life insurance is usually a decreasing term policy because the coverage declines gradually just like the mortgage.
2.
Level Term - This policy also has a defined period of time but the face amount of the policy remains level.
There are commonly 5, 10, 15, and 20 year level term policies.
These are excellent policies to cover short term or intermediate term debt obligations.
3.
Annual Renewable Term - This term policy insures for a specified face amount with annual increases in premium.
The rates are very low at the beginning and very high in the later years.
4.
Credit Term - This type of term insurance is rarely discussed but it is purchased all the time when we buy our automobiles, furniture and other household goods.
The term life protection is purchased to protect the lender.
It is optional at the time of purchase.
The lender is the beneficiary.