Term Life Insurance

The basic idea behind term insurance is that there are stages in life when families need more life insurance than at others.  For example, when the children are young and at home and the mortgage payments are due, the need is probably greatest.  Obviously, when the children move out and the house is paid for, the need drops significantly.

Term life insurance, therefore, was created to cover a set length of time (“term level” – 10-year term, 15-year term, etc.) and then to either increase in premium if kept or to terminate.  The bottom line is that term insurance does not remain the same.  It’s either increasing in price, decreasing in benefits, or terminating; it’s not intended to remain the same for your “whole life”.

Original mortgage insurance, for example, was designed as decreasing face amounts that mirrored the reducing amounts still owed on the home.  The premium remained the same, because the benefits decreased over the term of the policy.

There are also policies that increase in premium gradually each year at the anniversary date, making the increases in smaller amounts rather than a single 10-year or 20-year jump all at once.  Regardless of whether you purchase an annually renewable policy or a 30-year renewable policy, your coverage can be renewed without health questions at a higher term life premium or converted to a whole life or universal life plan at an even higher (though stable) premium.

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Types of Life Insurance
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senior market advisor Article added 08/16/2011  by Amber Douglas
Senior Market Advisor: Morgan White Group

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