Term life insurance is the most basic, and therefore the least expensive, form of life insurance. In fact, it’s so cheap that many people don’t even consider it a viable option for protecting their family in case something happens to them. But when compared with other types of policies (group, whole-life), term plans are not only cheap but also simple and easy to understand.
Term life insurance is the most basic type of policy, which means it tends to be the least expensive.
For example, if you have a term life insurance policy that lasts for 30 years and has a death benefit of $500,000, your premium would be $250 per month. If you were to get this same coverage in whole life insurance, it would cost an additional $5,000 per year—for the same amount of coverage.
However, keep in mind that term life is not as flexible as other forms of insurance like universal or variable life. The reason for this is because these other policies allow you to keep your money invested so that it can grow over time while still having access to it when needed.
For example, a 20-year term policy will have a level premium for 20 years.
- Term insurance is the most basic type of policy. A term policy generally provides coverage for a set period of time, such as 10 years or 20 years. The premiums are fixed and level throughout that time frame. For example, a 20-year term policy will have a level premium for 20 years.
- Term life insurance is the least expensive type of protection available because it has no cash value and doesn’t build any equity (or ‘surplus’) during its duration.*
- This means there’s no interest accruing on the money you pay into your policy each month.*
When the level period expires, premiums increase.
When the level period expires, premiums increase.
The rate of increase depends on the type of term policy you choose. Some policies will increase their premiums every year, while others will raise them every 5 or 10 years. The premium amount is usually determined by your age at the time you purchase the policy and whether or not it’s guaranteed renewable (more on that later).
Convertible term insurance is a type of term life insurance policy that can be converted to permanent life insurance at the end of the term.
These terms is usually cheaper than permanent life insurance because it doesn’t include an investment component or have a cash value that builds up over time. However, there are no guarantees when it comes to converting your convertible term policy into permanent coverage; you may not qualify for conversion based on new health conditions or other factors, and you might end up paying more for your permanent coverage than if you had purchased it directly in the first place.
Level-premium term life insurance is a type of term life insurance that offers a flat premium. In other words, the premium remains the same for the entire term, which can be anywhere from one to 30 years (depending on your health and age). The policyholder has the option to renew the policy at the end of its term, or cancel it and receive any outstanding death benefit.
Annual renewable term.
Annual renewable term life insurance is the most expensive type of term life insurance. It’s attractive to those who don’t expect to have any health problems or other changes in their lives because it allows you to lock in a set premium for a set period of time, even if your health deteriorates over the years. For example, if you’re 65 years old and want a 20-year term policy with $1 million worth of coverage, the annual premium will be about $2600 per year ($1300 for the premiums themselves plus $1500 for taxes and fees). If you’re healthy at this point and continue paying premiums until age 75 (which would be 25 years), then when it comes time to renew your policy each year after that point (or is allowed by law), there will be no change in price—you’ll still pay $1300 per year.
This makes it great for people who know exactly what they need when they buy their policy but don’t want anything changing over time—but unfortunately means it’s not ideal if something happens that causes your needs to change later on down the road (for example, getting married or having children).
Term life insurance is the simplest and cheapest form of life insurance available.
Term life insurance is the simplest and cheapest form of life insurance available. It’s also a great option for people who are healthy and don’t need coverage for long periods of time.
Term life insurance policies typically have no medical exam requirement, making them easy to get approved for quickly. They’re also inexpensive because they’re guaranteed renewable, which means your premiums cannot increase over the course of your policy term.
Term life insurance is a smart choice for many people. The policy’s simplicity and affordability make it an ideal fit for people who need only basic coverage and don’t want to worry about future premium increases. However, if you have a higher income and can afford more expensive premiums, consider a whole life or universal life policy instead.