What to know About Term Life Insurance
declining term life insurance
THINGS TO KNOW ABOUT TERM LIFE INSURANCE IN ARIZONA
Term insurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered pure insurance, where the premium buys protection in the event of death and nothing else.
There are three key factors to be considered in term insurance:
- Face amount (protection or death benefit),
- Premium to be paid (cost to the insured), and
- Length of coverage (term).
Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include Level, Annual Renewable and Mortgage insurance.
Level Term policy has the premium fixed for a period of time longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long term planning and asset management because premiums remain consistent year to year and can be budgeted long term. At the end of the term, some policies contain a renewal or conversion option.
Guaranteed Renewal, the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured age at that time. Some companies however do not guarantee renewal, and require proof of insurability to mitigate their risk and decline renewing higher risk clients (for instance those that may be terminal).
Renewal that requires proof of in-surability often includes a conversion options that allows the insured to convert the term program to a permanent one that the insurance company makes available. This can force clients into a more expensive permanent program because of anti selection if they need to continue coverage. Renewal and conversion options can be very important when selecting a program.
Annual renewable term is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured age at that time.
Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.
A policy holder insures his life for a specified term. If he dies before that specified term is up, his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing.
If you have questions or need Life insurance info in Tucson Arizona give us a call at 520 940 6152 OR complete the REQUEST A QUOTE and we will get right back to you.
declining term life insurance
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