Term Life Insurance

Term life insurance is like renting. The most common type of
term policy is called Level Term where you choose an amount
of coverage and pay a level premium for a set period, usually 10-30 years.

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How it Works

Term insurance is very affordable when you are young and therefore a fantastic way to cover your higher liabilities at that time in life.i When you’re young you can get loads of term insurance for pennies on the dollar. The prices are almost ridiculously low.

But yes, there is a catch. As you get older, premiums go up. The price will remain the same, if you have a Level Term policy, but when you get to the end of the level term period, they go up dramatically!

Statistically, the premiums on term insurance will get so expensive you’ll probably drop the coverage before you die. The insurance companies know this. Term insurance is a big money maker for them because less than 1 out of every 100 term policies pay a death benefit.
Term insurance is like renting - you never build any equity.

Types of Term Insurance

Term Insurance comes in a few different flavors:

  • One-year renewable term – premium goes up every year
  • Level Term (for a period of usually between 10-30 years) – premium is level until the end of the “level term” period
  • Recap Term – refunds or recaptures a portion of your premiums in some way at the end of the level term period or upon conversion to a permanent life insurance policy
  • Decreasing Term – a decreasing amount of coverage usually purchased to cover a specific decreasing liability such as a mortgage

Some term policies include a Conversion privilege. In most cases we recommend Level Term insurance that is Convertible to a good whole life insurance product in the future.

See: Planning for the Future with Convertible Term Insurance – PODCAST

The Cost of Term Insurance

Term insurance is a great low-cost, short-term coverage option. Long-term, it’s quite expensive, so you also want to think about including some whole life insurance to build equity and ultimately recover the cost of your life insurance.
You can read more about Whole Life Insurance here OR watch this video for more information on the different types of life insurance and how they work.

Summary

Without understanding the true costs of the different life insurance products and your individual needs there is no magic formula for anybody to tell you what policy or policies you need to own.

Usually some combination of Convertible Level Term and Whole life will work best, but each person is unique.

Please call to discuss your situation: 702-660-7000 OR

Footnotes

(i) A young family will typically be facing many years of expenses for raising children in addition to a mortgage and perhaps student loans.