Term Life Insurance Benefits: Term life insurance is the simplest of all insurance. The insured selects a coverage amount and defines how many years the policy will be maintained. This time can range from one year, up to 30 years. If an insured chooses a term of 5 years, upon completion it may be necessary to renew the policy, change it or simply let it expire.
This type of insurance is very popular in cases in which you need to have protection for a certain time; For example, when your children are small, while you are paying the mortgage on your house, or until you have your own savings that will allow you to leave your family “accommodated” without the need for insurance. So when the need no longer exists, you can choose not to renew the insurance, and thus the payment of premiums is saved.
Term Life Insurance Benefits
One of its great advantages is usually the price since as you are buying the insurance for a specific period of time, the premiums are usually exactly the amount that the insurer needs to cover the cost of your policy and there are no extra charges for a supplement for the future price of the insurance.
Although it also has a great disadvantage and is that many times the need to have insurance protection remains indefinitely, although it has taken only a few years. For example, if you bought insurance for 20 years, because you thought that at that time you would already have the house paid or your children would no longer be your responsibility, but you realize that at the time your insurance is going to expire, none of the two things have happened (since he had to refinance his house several times or were born guys later than planned and these are still at home …). It could happen that after 20 years when you want to renew the policy, the cost of the new insurance is very expensive or you have become ill and by then it is not “insurable”.
For the rest, you can literally have several insurance policies simultaneously, so that when you go over one, you have another and so on. The most common terms of term life insurance are:
- One year, renewable every year
- 5 years, renewable
- 10 years
- At 15 years
- 20 years old
- 30 years old
- Up to a specific age (65 years, 70 years, etc.)
The popularity of each type of term insurance varies according to the times. A few years ago the most popular policy was the renewable one per year, but it is not anymore. Today the most popular policy is that of 20 years. However, any of these policies is extremely difficult and would be very expensive to obtain for people over 80 years of age.
There are other very common term policies such as level policies, that is, those in which the amount insured does not change with the passage of time. However, sometimes the insured prefer to have a greater amount of insurance or protection in the first years and to lower the amount of coverage over the years; The latter is known as declining term policies, because they estimate that their own financial means may cover part of the insurance needs that they can not cover at the beginning of their professional life.
These policies could begin, for example, with a coverage amount of 100 thousand dollars and in year 5 decrease to 90 thousand, in year 10 decrease to 80 thousand and so continue to decline every many years of validity. The price of the same could be lower than that of the leveled term policies.
Renewables or not?
Another important value of term policies is that they can be renewed ( renewable ). If a policy were non-renewable, upon expiration, the insured would have to prove that he or she is still eligible for new insurance and most likely should undergo a new medical examination. If the policy is renewable, the insured is spared the medical examination and the possibility that his health has deteriorated and he is no longer eligible for the same insurance he had before, some years ago when he initially obtained insurance.
Do not confuse the possibility of renewal, with the fixing of the price of the premium. When it is guaranteed that a policy is renewable, there is talk that there is no need to do a medical examination again, but this does not ensure, in general, that the premium continues to cost the same, since, in the end, the insured he has aged and by law of life he is more and more prone to death; therefore the risk of the insurer increases with the years, as well as increases the amount of the policy.
Actually, the price of the policy is based on the age, gender and health status of the insured, as well as the risk that the insurer takes with said policy and the insurance time. For example, a 25-year-old woman will pay for a less expensive policy than a 65-year-old woman, even though both appear to be in good health. If you decide on 5-year insurance (renewable), it will cost less than if you choose a 30-year term policy.
When in 5 years the woman is no longer 25 years old but 30 years old, she will pay the premium corresponding to a woman of 30 years, even if the policy is renewable.
Another option for the insured at the end of the term is to convert that policy to term, which ends in x years of issued (in the example, 5 years) in another type of insurance, such as permanent.
In this case of conversion, the applicable premium will be determined by the age of the insured, and since it is a conversion it will not be necessary to practice new medical examinations.
What is a premium reimbursement policy?
Hundreds of thousands of people find it necessary to have insurance, even if they feel dissatisfied because they have to pay year after year for insurance that expires every so often and that no one wishes to have had to use because then it would mean that the insured has already died.
For this reason, the insurance industry has devised a new type of insurance in which it is guaranteed that if the term of the insurance passes and they have not had to use it (since the insured is still alive and his beneficiaries have not received any compensation), the insurer will return the money paid in annual or monthly premiums; Of course, this guarantee will have a substantial surcharge on the life insurance premium.