Ponte Vedra Beach, Florida — As the name suggests, the coverage expenses in a term life insurance are meant for a particular period of time. After that duration, the policy expires. Then, it’s up to the policy holder to either renew the policy or let the coverage end. The beneficiary would receive the benefits if the policy holder dies within a set period or term. However, if the policy ends before his death, then the beneficiary receives nothing. As opposed to permanent life insurance, it does not provide saving components that could be used for wealth accumulation.
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Since term insurance can be purchased in large amounts for a relatively small initial premium, it is well suited for short-range goals. “The rates that are being offered by the many life insurance companies currently in the market place are highly competitive and affordable. It pays for the consumer to make the carriers compete for their business,” according to Vince Bagni, managing partner of Paramount Life Insurance. These include life insurance coverage to pay off a loan, or providing extra life insurance protection during the child-raising years, etc.
The duration of a term life insurance could range from the simplest one year to 10, 15, 20, and even 30 years. In a one year term, also referred to as the annual renewable term, the benefit is provided by the company only if the policy holder dies within that span. The amount of premium is according to the expected probability of the owner dying in the same year, whereas the level term life insurance has a fixed rate premium throughout the span of the contract. This is also a renewable term insurance, and the premium is based on the total cost of each year’s annual renewable term rates. The insurer makes the adjustment of rate along with the time value of money.
FEATURES OF TERM LIFE INSURANCE
Initial affordability makes term life insurance convenient and an attractive option for the applicant.
Term life insurance policies have adjustable premiums. This means that the company may raise or lower premiums at some point specified in the policy. However, this is based on projected changes. These could include investment earnings, mortality experience, persistency and expenses. However, premiums may never be raised above the maximum premiums stated in the policy.
The level term policies allow the policyholder to continue coverage after the original coverage period of the policy. Every time the policy is renewed, the premium increases to the amount for the attained age of the insured at that time. This right is usually offered for a specific period, which varies depending on the type of policy. Bagni states, “if you are coming to the renewal on your level term policy, you are not going to be happy with the renewal amount. It makes a lot of sense to shop for a new level term.”
Term policies are convertible to age 75. This allows the policyholder to exchange a term affordable life insurance policy with a permanent insurance policy at any time while the policy is still in place