What is Term Life Insurance?
Term Life Insurance is a type of life insurance policy that covers the policyholder for a specific amount of time, which is known as the term. The term lengths vary according to what the individual chooses. Terms typically range from 10 to 30 years and increase in 5-year increments, providing level term insurance. Rates stay the same throughout the duration of your term, so locking in a rate earlier in life can mean savings later. Similarly, if you have children, you might want to choose a term that will last until your children are financially independent. If you’re not sure how long your term length should be, one of our agents would be happy to speak to you and help you find the right policy.
What are the Benefits of Term Life Insurance?
Among the most popular life insurance products available, term life policies tend to be more affordable. They typically provide an amount of coverage for much less than permanent types of life insurance. Like any policy, term life insurance has benefits and drawbacks depending on what will work best for you. The benefits of term life include affordability and the ability to customize your term length and coverage amount based on your needs. However, for those looking for a permanent option or access to a cash value account, whole life insurance, rather than term life insurance, may be the better option.
What are the Benefits of Term Life Insurance?
Depending on the type of policy, term life can offer fixed premiums for the entire term or life insurance on level terms. The death benefits can be fixed as well. Because it’s an affordable life insurance product and the payments can stay the same, term life insurance policies are popular with young people just starting out, families and people who want protection for a specific period of time. For example, someone who wants to protect an income until retirement or while paying off a home mortgage. Before you get a life insurance quote or buy a life insurance policy, try our online life insurance calculator to see what options for coverage and term length is right for you.
Term life insurance doesn’t accrue cash value like permanent life insurance products, but with many term policies, if the insured passes away during while the policy is active, beneficiaries do receive the full-face amount. For example, if the insured individual takes out a 20-year term policy worth $100,000, they are covered for 20 years. If the insured dies within those 20 years, the beneficiary receives the full $100,000. Even better, the benefits paid on a term policy are typically tax free*. However, the insured can’t cash out a term life insurance policy while still alive. If you’re looking for a life insurance policy you can cash out, consider permanent life insurance instead.
Term Life Insurance vs Permanent Life Insurance
What Does the ‘Term’ Mean in Term Life Insurance?
As stated above, “term” in the context of Term Life Insurance means: a life insurance policy that covers the policyholder for a specific amount of time, which is known as the term. One of the most popular types of term insurance, level term life insurance, (or term level life insurance) available through AIG Direct, offers life insurance on level terms or a fixed premium payment for the duration of the term. It also has a fixed benefit amount and the terms range from 10 to 30 years, usually in 5-year increments, although they are sometimes available in 1-year increments as well.
A longer term could mean a higher monthly premium, because the carrier typically averages the cost of insuring someone who is younger with the cost of insuring someone who is older (when premiums are more expensive). Because level term life insurance has a “set it and forget it” fixed payment, it can be easier for families to budget. Having a fixed benefit that pays the face amount also holds appeal as straightforward insurance. If you have questions about term life insurance or what type of life insurance is best for you, call us at 800-294-4544 to speak to an agent and get your personalized term life insurance quote.
Examples of Term Life Insurance Rates
* Term Life Death Benefits are excludable from your beneficiary’s federal taxable income under most circumstances. You should consult your tax advisors for your specific factual situation.
**Rates reflect policies in the Preferred Plus Rate Class issues by American General
