Term Life Insurance: Temporary Coverage

 

What is Term Life Insurance? 

Term life insurance provides a fixed death benefit for a set period of time, usually 10, 20, or 30 years. Premiums remain level during the term and coverage expires at the end of the term unless renewed. Unlike whole life insurance, term policies do not build cash value.

Term life meets the need for temporary coverage with large benefits at affordable rates. It is appropriate when there is a defined need, like replacing income during working years or paying off a mortgage.

Is Term Life Right for You? 

Term life works well if you need coverage for a certain number of years. The death benefit and premiums stay the same throughout the term. At the end of the term, coverage expires or premiums increase substantially.

Term life does not work as well if you want lifelong coverage or access to cash value later on. Look at whole life or universal life if you need permanent coverage.

Younger people often benefit more from term life because they have more human capital to protect. Term life can cover temporary needs like mortgages, income replacement, and financial support for minors.

Key Points About Term Life

• Death benefit remains level
• Premiums remain level for the term period
• Coverage expires at the end of the term
• No cash value accumulation
• Optional riders available for added benefits
• May have conversion privileges to switch to permanent policy

What Impacts the Cost of Term Life? 

Factors that affect term life rates include:

• Age
• Health/medical history
• Coverage amount
• Length of term
• Hazardous activities
• Driving record
• Occupation
• Riders selected
• Frequency of premium payments

Tips to Save on Term Life 

Ways to potentially save on term life premiums:

• Buy at coverage level breakpoints (e.g. $250k instead of $225k)
• Pay annually for discount
• Use a "laddering" strategy with multiple staggered terms
• Ask about reconsideration if health improves

Considerations with Group Term Life

Group term life through an employer is convenient but has drawbacks like lack of portability and higher cost per $1,000 of coverage. Supplement with private insurance to fill gaps.

Conclusion 

Term life provides affordable pure death benefit protection for temporary needs. Shop carefully based on your specific situation and desired coverage period. Look for ways to optimize cost savings when purchasing coverage.