Term Life Insurance

In 2010, half of U.S. households (58 million people) were underinsured and did not have adequate life insurance. What's more, almost one-third of households (35 million people) did not have any form of life insurance, according to the Life Insurance Ownership Study conducted by LIMRA, an international insurance group that provides research, consultation, and compliance and regulatory services to financial services companies around the world.

Life insurance is a contract between a policy owner (insured) and an insurance provider (insurer) in which the insurer agrees to pay a designated beneficiary or beneficiaries a sum of money in the event of the insured's death. In exchange, the policy owner pays a specified amount, known as a premium, in regular intervals or in a lump sum. For many families in the United States, life insurance has become a common financial vehicle for replacement of income for a household's primary wage earner at death.

Of all the different types of life insurance products, term life insurance is probably the best-known form of life insurance. It is an insurance policy with a set duration limit on the coverage period, which can range from 1 to 30 years. When the policy period expires, the policy owner can elect to renew the policy or let the coverage end.

Generally, term insurance is a low-cost alternative to another form of life insurance, permanent insurance. Term insurance has neither a cash value nor a policy loan provision, both of which are commonly found features in permanent life insurance products. There are three types of these types of policies: annual renewable term, level term, and decreasing term.

Types of Term Insurance

Annual Renewable Term

Annual renewable term is a type of policy in which policy owners have the right to renew their coverage at the end of the given term without the need for providing evidence of insurability. The term period for this type of insurance can range from 10 to 30 years.

Level Term

Level term is an insurance policy that provides a fixed amount of coverage with set premiums over a defined period of time. Common term periods for this type of insurance are 10, 15, 20, and 30 years.

Decreasing Term

Decreasing term insurance is a policy in which coverage decreases throughout the term, while the premiums remain the same. This form of insurance is normally used to cover a policy owner's large financial obligation, such as a mortgage, college tuition, or business capital. Common term periods for decreasing term insurance are between 10 and 30 years.

Knowing the different types of life insurance is important in deciding whether to purchase what type of insurance to buy, and will help you when you get a term life insurance quote to know if the quote is the best one for your situation.

Term Life Insurance Quotes

This type of life insurance is a viable alternative to permanent insurance. It has neither a cash value nor a policy loan provision, which are features commonly found in permanent life insurance products, but never in term life insurance quotes.

The lower cost may be the most appealing aspect of this type of insurance. For many, it is a solution to protect assets and cover any major financial obligations.

Several factors influence the term life insurance rates that a potential purchaser will receive, including:

• Age
• Gender
• Personal health history
• Family health history
• Length of term
• Coverage amount
• Type of term insurance
• Occupation
• Participating in high-risk activities
• Cigarette or drug use
• Medication use

Generally, the monthly premiums for the insurance policy will be lower when the it is purchased at a younger age. For example, a policy with coverage of $500,000 will have a monthly premium of $15 per month for a 35-year-old individual; however, the same policy coverage will cost about $45 per month for a 50-year-old person.

While there are many factors that affect rates, this type of insurance can provide financial peace of mind at affordable rates. Nonetheless, potential purchasers should understand this type of insurance before they purchase a policy.