What is Term Life Insurance?
Term life insurance can be complicated, and we will be with you every step of the way in answering the age-old question of ” What is term life insurance?” A term life policy 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. 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. Speak to an agent toady about a term life policy that’s right for your situation, and get your personalized term life insurance quote.
How Does Term Life Insurance Work?
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 several other types of life insurance, but with many term policies, beneficiaries do receive the full face amount. For example, if a policy’s face amount is $100,000, the beneficiary receives the full amount, pure and simple. Even better, the benefits paid on a term policy are tax free, according to current tax laws.
There are several types of term life policies available through AIG Direct, including level, renewable and convertible. Get your free, no obligation, term life insurance quote today.
Level Term Life Insurance
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 increment, but are sometimes available in one year increments. Common durations for level life insurance policy terms include:
- 10 year level term
- 15 year level term
- 20 year level term
- 25 year level term
- 30 year level term
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, “pure” insurance.
Renewable Term Life Insurance
A renewable term life insurance policy available through AIG Direct continues in force for a specified term or terms, usually in increments of one or five years. It can be renewed without the insured having to undergo a medical examination or provide other evidence of good health or insurability each year. The premium for a renewable term policy generally is based on the insured’s current or attained age.
Convertbile Term Life Insurance (Converting Term to Permanent Life Insurance)
The option to convert term life insurance can be “a valuable benefit” for some. This option allows people to convert their term life policy into a permanent life insurance policy, without a medical exam or the need to prove insurability. As time goes on, policyholders may need more coverage, or they might decide a policy with a cash value makes more sense. Having the ability to convert the policy offers nice flexibility as needs or financial goals change. There are two things to be mindful of with this convertible option. First, when you convert to a permanent life insurance policy, the premium increases. Second, there is typically a window during which you can convert. The ability to convert does not run for the entire term, so it’s wise to watch for the deadline.