Unlike permanent life insurance, which provides protection for life, term life insurance provides protection for a set number of years. If you die during that period, the policy pays your beneficiary; if you live beyond that period, the policy pays nothing, and you’ll need a new policy if you want to continue coverage.
Do you think term life insurance is right for you? Here are five questions to answer before deciding:
Is a term policy appropriate in my situation? Term life insurance works when the need for protection is temporary or if premiums on a permanent life insurance policy are too high.
Which type of term policy do I want? In level term insurance, the death benefit stays the same for the life of the policy; in decreasing term insurance it decreases over the life of the policy and is useful if you have financial obligations that decline over time, such as a mortgage; in annual renewable term insurance, the death benefit stays the same for the term period, but premiums increase.
How long a term is best? This depends on what the policy is designed to protect against. If you want it to pay for your child’s college education should you die before he or she graduates, you would want the term to continue until he or she is out of school.
Do I want a renewable term policy? Renewable term life insurance policies can be converted for another term period without your having to prove you’re healthy.
Do I want a convertible term policy? Convertible term life insurance allows you to convert to a permanent life insurance policy during a specified period of time without having to show that you’re healthy.
Once you have the answers to these questions, discuss the options with your insurance professional. He or she knows your situation and can steer you to the best solution for you and your family.