Term Insurance is the easiest to understand and has the lowest price.
It is the most affordable type of insurance when initially purchased and is designed to meet temporary needs.
It provides protection for a specific period of time (the “term”) and generally pays a benefit only if you die during the term.
Terms are usually 10, 15, 20 to 30 years, with 20 being the most common.
When you shop for term life:
- Choose a term that coincides with the years you have left on your mortgage, and until your kids will be on their own.
- Buy an amount your family would need if you were no longer there to provide for them.
Some policies can be automatically renewed at the end of the coverage period, and some can be converted to permanent insurance without need for a medical exam. Term conversions are common for those people whose health has deteriorated during the term and may otherwise be uninsurable
What Happens When the Term is Over?
You Basically have 4 Choices:
Drop the Policy
You no longer need it because your house is paid off, the kids are married and on their own and are not depending on your income, or you have enough money saved to support your wife or pay for your funeral expenses if needed.
Extend Your Coverage
Some plans can be extended and most of the times you can continue without taking an exam or proving insurability; however it will be significantly more expensive. Some families are opting for this choice because they may need the coverage for a few more years so they can collect the death benefit.
Convert Your Policy
Most life insurance policies offer this choice. You may convert into a Whole Life or Universal Life , though this will highly depend on if they are offering that product when your term expires.
Keep in mind that this must be done before your term is over and typically before the age of 70. Just like extending your coverage, you don’t need to go through an exam or prove insurability.
This is a good choice for people who still need life insurance but aren’t in the best of health, so either buying a new policy at a later age will cost too much or they could not be accepted.
Buy a New Term Policy
For some, this may be the best choice. If you are still relatively healthy under the age of 60 and don’t want to pay for a whole life policy, this will be the best choice for you