Term life insurance is the most affordable type of coverage; it comes with the lowest premiums and, sometimes, has a cash value that you can settle for prior to the end of the agreement. When you’re learning about the different types of life insurance, you’ll undoubtedly encounter term policies the most often. These are highly flexible in terms of both length, death benefits and premium costs. Before you decide to invest, here is a rundown of all the most important details about term life insurance.
Protection Lasts as Long as Your Contract
The duration of a term life insurance policy can range from a few years to several decades. Some people choose this type of plan because it is the most affordable and helps them reach certain goals, like having guaranteed coverage for debt during a loan’s lifespan or protecting children under 18. If you want to take out a loan to cover debt, then you should look at the length of your outstanding loans rather than the term of the life insurance policy itself. The best way to ensure coverage and avoid responsibility for debt falling onto your loved ones’ shoulders is to pick a policy that either covers the length of your loans or exceeds them.
There Is No Cash Value on Term Policies
If you’re interested in accruing a cash value that you can use later, then you’ll want to look for whole or universal coverage. Term coverage is chosen for its affordability and death benefit; there is no ability to take out money or settle for a term policy. Whole life insurance, on the other hand, accrues a value over time that can borrow from or exchange your coverage for later. You can look at a guide that explains a viatical settlement in order to add to your policy to receive a cash amount in the event you are diagnosed with a terminal illness. Looking up the estimated worth of your policy is easy and free with an online tool.
You Can Convert Your Policy
Most forms of term coverage have an option to become permanent after a set period of time. When this happens, your premiums will increase substantially, so you’ll have to consider whether this is feasible for your budget before you decide to convert. However, for those who wish to keep coverage while gaining access to a cash value, this is an option worth exploring with potential providers. The death benefit can either stay the same or increase based on how much more you can pay in premiums. You can choose to pay for your premiums monthly, semi-annually, quarterly or annually. Every provider has their own requirements and financing options.
You Can Get Your Money Back
If you outlive a term, then you can receive the amount of money you put into the coverage back. This typically applies to life insurance policies that last 20 years or longer; the return of premium on term life insurance varies among providers, but a quality insurer will give its customers the ability to receive a return on investment should they live beyond the agreement of their coverage. You may also decide to renew your policy or convert it to permanent at the end of your term; remember to keep your family’s projected needs in mind and update your life insurance as things change.