A simple definition will answer the question "what is term life insurance?" This is insurance that you take out on your life for a certain period of time. If you die during that term then the insurance company will pay the amount of the death benefit to your beneficiary.
You do not gain any monetary benefit from having such a life insurance policy while you are still alive, but at least you know your loved ones will be provided for after you are gone. Once the period expires, you can choose to renew the policy or decide not to have any life insurance at all.
With term life insurance, you must pay the premiums on the policy either annually or monthly. As soon as you stop making the payments, the policy becomes null and void. The primary reason for taking out such a policy is to provide benefits for your family so that they can still continue enjoying the same quality of life as they had when your wages were contributing to the family finances. The money from the death benefit is paid in a lump sum, which your dependents can use to pay your funeral expenses, pay off your debts or have money to pay for a college education.
When you take out a term life insurance policy, you have to provide proof of insurability. This generally means that you must have a medical examination to prove that you do not have a terminal illness or that you do not have a medical condition that will bring about an early death. There are insurance companies, though, that will sell you a policy without such an examination.
To get the lowest premiums for the most coverage, the best time to take out term life insurance is when you are young. However, when you renew the policy you will have aged and therefore the premiums will be higher to reflect the additional risk. If you are in good health, have a medical exam and enjoy the benefits of lower premiums, or apply for a no medical exam life insurance policy and pay higher premiums.
What is level term life insurance? This question is quite common because there are two different kinds of term life insurance. In level term, your premiums stay the same throughout the term and the amount of the death benefit also stays the same. Whether you die in the first year of the policy or the final year, your beneficiary will receive the same amount of payout.
Another type of term life insurance is called decreasing term life. In this type of policy, the amount of the death benefit decreases at various increments during the term. The result is that the payout is higher at the beginning of the term than it is at the end. For this reason, very few people choose a decreasing term policy making level term policies the most common.
The cost of term life insurance depends on the level of risk you pose to the life insurance company. If you pose a low level of risk of dying during the term your premiums will be lower than if you are more likely to die. If you work in a dangerous occupation where fatal accidents are common, then no matter how young or healthy you are, you will pay a higher rate than a person working in a less dangerous field.
There are also discounts available in insurance policies that you should ask about, such as having all your insurance policies with the same company. These discounts will make term life insurance more affordable for you.
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