Making Term Life Insurance Work for You

2007-03-08 10:33:40

( Insurance )



There is no question about the fact that everyone needs life insurance. But in order to insure yourself at an amount that would cover all of your home expenses after you "move on", you will also need to pay a large amount of premium. So you need to choose the right insurance package to fit your needs and budget.

Your life insurance quote depends on many factors such as your age, occupation, and type of coverage. Under type of coverage, you can choose between whole life, variable life, universal life or term life insurance packages. Premium amounts will be different under each type. The first three types are also called permanent life insurance packages, as your entire life is covered and the premium amount will not change as long as you keep your payments current. The first three also have investment or cash values, and your insurer pays you dividends each year just like a financial investment. You can still get partial cash refunds in case you don't want to continue the policy.

Term Life Insurance Features

In this type of package, you are covered for a finite number of years, so you pay premiums that will cover only those years. You can pay monthly, quarterly, semi-annually or annually, or even make a one-time payment good for the entire coverage period.

Term life insurance rates are the cheapest and more affordable of all types of insurance packages. However, the premium price may change each time you renew. For instance, you will pay the same premium annually during your coverage for a 20 year term life policy, but once the 20-year period ends, you will expect to pay a higher premium.

Moreover, term life insurance does not retain any cash values. You cannot cash in on your premiums even if you have been paying for many years. It is like car insurance which becomes invalid upon its expiry.

Tips for the Term Life Insurance Buyer

Being the cheapest, term life is best for young students or new homemakers who otherwise cannot afford higher premiums. Through online sources or by contacting an agent, you can ask for a term life insurance quote.

Be sure to find out what age groups are covered by the same premium amount, so that you can "lock" the rate for a few years. This will enable you to have protection up to a longer period of time without worrying about ever-changing premium rates.

Always keep track of your policy's expiry dates, and do not miss any premium payments.

As term life has no cash value, it is wise to keep it in force only for a few years at the most. Some companies may even allow you to convert your term life policy to a permanent policy, with only a few adjustments in the premium rates. As much as possible, shift to permanent life policies once you can already afford to do so.


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