Most people will say that they have life insurance, but they don’t actually know or understand the type of insurance they have. Did you know that there are only 2 types of life insurance? Term insurance and permanent insurance — so, what’s the difference between the two?
Today, I’ll explain what term insurance is and how it works.
When you think of term insurance, you should think term = temporary. Term insurance is pure life insurance that covers you for a set period of time. You choose the term of your policy, the most common terms are 10 and 20 years, but some companies offer many different term options. The term that you choose, say 10 years, is the period in which your premiums will not increase for, so for a 10 year term, your premiums are guaranteed to stay the same for the next 10 years. Most term insurance policies are convertible and automatically renewable. This means that at the end of each term, your coverage will automatically renew and the premium will increase and stay at the new, higher premium for the next term. This happens every term renewal until the expiry of the policy. Term insurance coverage has an expiry date, each product’s expiry will vary, but it is usually around the age of 80.
Convertibility is one of the biggest benefits of term insurance, this means that you can easily convert your coverage to permanent insurance, which we’ll go over next week. When you convert your term coverage to permanent coverage, you do not have to show any evidence of medical insurability. Term insurance protects your insurability, and guarantees that you can lock in a permanent life insurance policy regardless of your health at the time.
Term insurance is very simple and affordable, it’s an extremely useful tool that will help you and your family protect against specific needs. Term insurance can be used to protect your family from loss of income due to a premature death, mortgage or loan protection, children’s expenses like childcare or education savings, and much more. Term coverage gives you the ability to cover your family for the amount of coverage that you actually need, and still keeps the premiums within your budget.
Don’t forget to check back next week to find out what permanent insurance is!