Term Life Insurance is the simplest and most direct form of protection for you and your loved ones for a specific number of years. It is also the most cost efficient form of protection for a finite period of time. You generally pay premiums on a monthly or annual basis and your family is protected for that “term” or year. The payments can fluctuate from year to year or come as a fixed rate over a limited period of time of your choice such as 5, 10, 15, 20, 25 or 30 years. After that fixed premium period is over the coverage of the premium rate expires and the cost of insurance will increase every year thereafter. There are various rates the premiums can increase at and there is a published schedule of expected increases as well as a published schedule of maximum increases. If the insured passes during the term while the policy is in force the death benefit offered will be paid to the beneficiary(ies). Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
Here is how the “guts” of a yearly renewable term policy works below in graphic form.
Yearly Renewable Term:
With a ‘Yearly Renewable Term’ you pay the same increasing rate every term.
5 Year Level Term:
With a 5 year premium you pay a fixed rate for five years then the annual cost of insurance increases every year.
10 Year Level Term:
With a 10 year premium you pay a fixed rate for ten years then the annual cost of insurance increases every year.
15 Year Level Term:
With a 15 year premium you pay a fixed rate for fifteen years then the annual cost of insurance increases every year.
20 Year Level Term:
With a 20 year premium you pay a fixed rate for twenty years then the annual cost of insurance increases every year.
25 Year Level Term:
With a 25 year premium you pay a fixed rate for twenty five years then the annual cost of insurance increases every year.
30 Year Level Term:
With a 30 year premium you pay a fixed rate for twenty five years then the annual cost of insurance increases every year.
