Save Money with Term Life Insurance
If you want insurance protection only and not a savings and investment product, buy a term life insurance policy. Initial premiums generally are lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest, but keep in mind that the premiums will increase as you grow older.
Term insurance is simple insurance. You pay the premium and get the agreed-on coverage for the length of the term. After that, you either sign up for a new policy or walk away. Neither you nor the insurance company has any future obligations. Many insurance companies will offer a new policy at new rates, but they are not required to do so unless it was written into the original policy.
The insurance company will probably require a medical exam before issuing a policy (some companies only require a medical exam for larger policies). The examination is basic, covering your height, weight, medical history, blood and urine testing. Your medical exam results and your status as a smoker/non-smoker can affect how much you have to pay or even your ability to buy a policy. If your medical exam results prevent finding life insurance, there is guaranteed life insurance coverage, sometimes called “quick issue” or “simplified issue” insurance. Guaranteed issue policies require no medical exam but charge a higher premium or have reduced coverage during an initial period in exchange for the guaranteed coverage.
As you age, the likelihood you will die sooner increases, so older individuals pay more for life insurance. Many term policies offer the option to renew your coverage at the end of the term without undergoing another medical exam. You also can lock in low premiums by asking for a “level premium” policy. That means for a specific time period, say 20 years; your premium rate stays the same. After that term expires, your rates will increase.
The greatest advantage of a term life insurance policy is that the premiums will be lower (usually a lot lower) than whole life insurance. And because it’s only for a limited-term, it can be purchased to meet a certain need, like a mortgage or college education for your kids in case you die. On the flip side, the main disadvantage to term insurance is that it’s only for a limited time. Premiums may go up substantially as you age. And some policies may not be renewable when the term expires.