A limited period of time
To understand term life insurance, let’s start with the first word– term. When you buy term life insurance, you are paying to be covered for a limited period of years. If you die before your insurance expires, your family will receive the payout. If you die after the period covered by your term insurance plan, though, your family won’t get anything.
Can’t I just renew the policy?
Of course. You can renew your term life insurance policy after it expires. Here’s the catch, though: your new term life insurance policy will be more expensive. The older you get, the more you have to pay for term life insurance. Each year that goes by increases the likelihood that the insurance company will have to issue a payout.
How many years does a term life insurance policy last?
It all depends on you. Some people buy 5-year term life insurance policies, but other people go for 30-year policies. The more years you choose to add, the more expensive your policy will be.
Who should buy life insurance?
If anyone in your family depends on you to pay the bills, you should take out some kind of insurance so that your family will survive if you pass. If you are a parent, you should get enough life insurance to cover you until your youngest son or daughter gets his or her first job. Also, if you have a large amount of debt, you can use life insurance to take care of it after you die– that way your other family members won’t have to pick up the bill.
Do I have to see the doctor before I purchase insurance?
Yes. The insurance company needs to know the amount of risk they are picking up when they issue your insurance. After a doctor evaluates your health and the insurance company takes a look at your medical records, they will be able to determine how much it will cost to provide you with a term life insurance policy. Other factors like your driving record and credit rating can either drive up or push down the final cost of your insurance.
What other kinds of life insurance policies are out there?
Some people take out permanent life insurance policies. Permanent life insurance policies are more complex than term life insurance. They often provide tax breaks and allow policyholders to buy securities, bonds or mutual funds. The money invested into the policy becomes available only after the policyholder dies. If you have a lot of money in the bank, it may be worthwhile to check out permanent life insurance. If you don’t have much money saved, though, don’t bother. Permanent life insurance plans are more expensive, so unless you can get some tax breaks to make up the cost, it makes more sense to go with a term life insurance plan.