A Term Life insurance policy is often referred to as pure protection. That is because Term Life Insurance fulfills the true definition of Life Insurance – to replace lost income due to premature death. Term Insurance provides a death benefit for a set period of time and does not build up cash value. It's often used to provide temporary protection for a mortgage, business bank loan or as income replacement of a breadwinner. Term Life Insurance can provide maximum death benefit at the lowest cost.
The most common type of Term Insurance is Guaranteed Level Premium Term Life Insurance. Depending on age, you can get terms of 10, 15, 20 and 30 years. The premium is guaranteed not to increase for the life of the term period. The longer the term period, the higher the premium because the older, more expensive to insure years are averaged into the premium. At the end of the term period, your premium can increase dramatically. Therefore, it is important to choose the proper term period and to be aware of when that period ends.
Most Term Life Insurance policies are convertible. This means you can convert or exchange your Term Life policy for a permanent life policy such as Whole Life or Universal Life Insurance with no additional underwriting. In other words, there is no medical exam you must pass. Your insurability is preserved no matter what your health situation is. However, Term Life Insurance has a conversion deadline. It is important to be aware of how long you have to convert your policy. Many young, healthy policyholders choose a convertible term insurance policy initially because of the low cost premiums and basic coverage that it affords their family. At some point, many of these consumers decide to upgrade their policy to a whole-life policy for a stable policy that will cover a mature family's needs.
If you find yourself in the situation where your premiums increased because your guaranteed level premium period ended, you should consider purchasing a new Term or Permanent policy to replace your current policy. However, if your health has deteriorated and poor health would prevent you from qualifying for a new policy, you may be better off keeping what you have. Most level term policies include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. It is important to note that the renewal may or may not be guaranteed and the insured should review their contract to see if evidence of insurability is required to renew the policy. The bottom line is, Term Life Insurance is a very inexpensive way to keep your commitments and provide for your family in the event that you are not there to do so!
CNB Insurance Agency is happy to help you evaluate your insurance needs and inform you of all your options.