What is Term Life Insurance?

The term life insurance policies offer coverage for a specific term or period of a individuals life. These life insurance plans are available in various terms, with five, ten, and twenty-years as the most common. A key feature to these policies is that the premium goes up as the age of the policy holder increases. So, as the insured gets older the annual cost will increase while the level of cover will remain unaltered. The rate structure stipulated in the plan will determine when a higher premium rate kicks in.
The rate structures can be split into two categories - level premium and increasing premium. On the level premium plans the annual cost will remain fixed for a set period, and than increase in later years. While the increasing premium plan features a premium that increases as each year goes by.
These life term insurance contracts will cease at the end of the initial term, usually at the age of sixty-five to seventy unless the plan is extended or renewed. Often the renewal procedures is seen as a formality as term insurance contracts are 'guaranteed renewable'. Meaning that no medical examination is require for a certain period after the insurance ends.
Once the stated age limited noted in the term insurance is reach there is one of two options available to the policy holder. Some of these term insurance plans offer the opportunity to convert on its expiry to a whole life insurance plan. Or if that option isn't open to the insured it will be necessary to apply for a new life insurance plan. As coverage is being obtained at an older age, it is to be expected that there will be a significant increase in the quotation put forward. And the premium can be even more effected if a pre-existing medical condition is known.
One of the main difference between term and whole life insurance is that the initial premium is more competitive for the term plans for the same death benefits. This can make term insurance a great option for young families with children in need of life insurance at an affordable cost.
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