Term Life Insurance

Why do you need term life insurance?

• You need protection for a short period of time, say the four years your child is in college.
• You need protection, but you have a lot of demands on your financial resources.
• You want to protect the lifestyle your income provides for your family. If two incomes are involved, consider protecting both of them.
• You need to replace the financial contribution of a non-working spouse.
• Your bank wants you to own life insurance in order to loan you money; perhaps to expand your business.

Term Life Insurance Overview

Term life insurance provides coverage for a limited period of time. With premium payments, beneficiaries get the proceeds if you die during the term of the policy, generally income tax free.

There are generally two types of term life insurance policies.

• Annually Renewable Term Life Insurance
  Premiums start out lower than level term premiums and increase each year.
  
  
• Level Premium Term Life Insurance
  Premiums are initially higher than annually renewable term but remain level for a set period of time, normally 10 or 20 years, then the contract ends. A new policy can be applied for at a higher rate as long as you still qualify.

A life insurance policy provides a time frame during which you can convert to a permanent policy, which is guaranteed to last for your entire lifetime at a guaranteed level premium.

When to Use Term Life Insurance

• The need for insurance is temporary.
• A large amount of coverage for the smallest amount of money.
• Lower premiums allow you to buy higher levels of coverage at younger ages.

Disadvantages of Term Life Insurance

• If coverage ends, replacement will likely cost more.
• A term life insurance policy can become more costly than owning a permanent life insurance policy and may be too costly to continue at some point in the future.
• Term life insurance policies have no cash value.