Understanding Term Life Insurance – How long do I need coverage for?
When shopping for term life insurance, you quickly realize there are many options available to you. Term life insurance provides coverage for a specific length of time or “term”.
A level term life insurance policy may be available for periods as short as one year to as many as thirty years. Level term life insurance means the death benefit and the premium are guaranteed to remain level during the initial term period. For instance, a 20 year term life insurance policy would have an initial coverage period of 20 years.
Some level term life insurance policies are both renewable and convertible. Renewable means that the policy may continue (renew) at the end of the initial term period to age 95 in some instances, without medical requirements. The renewal premiums typically increase substantially at the end of the initial term period. Convertible means the term life insurance policy can be changed to a different type of life insurance policy, such as Whole Life or Universal Life, without medical requirements. The lack of renewal and conversion options may limit the choices you may have to continue the term life insurance after the initial period.
When you are selecting a term life insurance policy, you want to take into consideration the period of time you will need coverage. A 20 year term life insurance policy is a popular plan, as many people with young families want to have coverage until your children are no longer dependent or you may have a mortgage of 20+ years. Remember, term policies can be cancelled without penalties if the coverage is no longer required.
A 10 or 15 year term life insurance policy would initially be less expensive than a 20 year term life insurance policy. However, you would have to choose to renew, convert or apply for a new policy at the end of the 10 or 15 year initial period. Renewal or converting would result in significant premium increases and applying for a new policy would take into consideration that you are now 10 or 15 years older and medical histories are required to get new life insurance policies. Should you have health issues, it could result in the inability to secure a new life insurance policy at the carrier’s best rating class or even potentially be declined.
About the author: Ken Buccico holds a LUTC designation and has been in the life insurance business for 39 years. His wealth of experience empowers clients to make best possible decision regarding a life insurance policy. To explore the best life insurance option, contact Ken at 1-800-651-1953 or KBuccico@Pivot.com.