Term Life Insurance: An Explanation

We at TopLine Life Insurance are committed to our clients. We pride ourselves in explaining the life Insurance options that are available to you and your family. In this article, we will provide you with a breakdown of term life insurance so that you can make a more informed decision about the coverage you want.

What is Term Life Insurance?

Term life insurance, or pure life insurance, is one of the primary forms of life insurance a person can have. It guarantees the payment of the specific, stated death benefit while the insured person holds the policy and makes the required payments within the specified term. When the term of insurance has expired, the insured may apply for a new policy but the approval and premiums, will be based on current health and attained age of the insured. Please remember an insured can normally convert to a permanent plan of insurance anytime during the life of the term policy.

How Does It Work?

Most policies are issued for either 10, 15, 20 or 30 years. The insured chooses the length of the policy that he or she would like. The premiums for the policy are locked in for the length of the policy. If the insured dies while the policy is in force the full death benefit will be paid directly to the beneficiaries. These funds are used to pay off mortgages and consumer debts, health costs, funeral costs, education costs, business loans and many other expenses.

Most of these policies do not generate cash value during the length of the policy unlike whole life or universal life policies. As a result of having no cash value, the premiums for term life insurance are significantly less expensive than whole life or universal life insurance. Once a term policy has expired, the insured has the right to convert the policy to a whole life policy or apply for a new term policy. The prices of a new policy will depend on the age and the health of the insured at that time.

For Example:

32-year-old, Frank, wishes to protect his wife and child in the event of his untimely death. He buys a $500,000, 15-year term life insurance policy with a premium of $35/month.

  • If Frank made regular monthly payments and was to pass away before his 47th birthday, the insurance company would pay the full $500,000 to his family.
  • Alternatively, if Frank allowed the term to expire, chose not to reinstate it, and died after the policy termination, his beneficiaries would not receive any policy benefit.
  • Finally, if Frank let the policy expire but chose to reinstate it before his death, the new policy’s premiums would be adjusted according to his current age, health, and life expectancy. The payments would most likely cost more than the premiums of the expired policy.

The second type of Term Insurance is referred to as Return of Premium Term Insurance. This type of insurance is more expensive than the traditional term insurance discussed above. It is usually issued as a 20 year term policy. After 20 years the policy ends. If the insured dies any time during the 20 years, the beneficiaries will receive the full amount of the policy. If the insured is alive at the end of the policy, they will receive a full refund of all premiums paid over the 20 years.

For example: if the insured paid $10,000 in premiums over the 20 years, they will receive a check for the full $10,000 at the end of the policy. In order to qualify for this refund, all premiums must be paid on time for the length of the policy. There are very few companies that provide this type of policy today. Please call us to find out which companies are currently offering Return of Premium Term Insurance.

Three Common Term Life Insurance Options

Term life insurance comes in three basic forms, so you can choose the term policy that works best for you.

Term life insurance is usually the least costly method of buying a sizeable death benefit. Therefore, term life insurance is more popular with younger clients, as their life expectancy is higher and their chances of developing a severe illness are minimal compared to those of older clients. If you are interested in purchasing an affordable term life insurance policy from a reliable insurer, take a look at our policies, weigh your options, and give TopLine a call today!

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What is the best kind of life insurance?

There are many life insurance policies from which to choose, and the best one for you might not be the best for someone else. If you need lower premiums, a term life insurance policy might be a good option. If you are looking for insurance that provides investment opportunities and does not expire until you pass away, a universal plan is an excellent choice. Speak to a TopLine Life Insurance broker to discuss your options.

What is a life insurance premium?

A life insurance premium is a regular payment you must make to your insurance company to pay for your life insurance policy. Continuous payments will keep your plan active, while missing payments could cause it to lapse. Different policies have different requirements for premium payments, so research possible policies and contact us at TopLine to find the right plan for you.

How much life insurance do I need?

This answer differs from person to person and is mostly dependant upon your finances. Typically, your minimum amount should be enough to cover your mortgage, loans, credit cards, and any other outstanding payments and debts.

Other considerations include:

  • College tuition assistance for your children or grandchildren
  • Income replacement for your spouse
  • Estate planning

Speak with a TopLine life insurance broker to avoid over or under-insuring yourself.

Should I buy life insurance before I turn 40?

Generally speaking, buying a life insurance policy when you are younger and healthier gives you a better chance of locking in a favorable policy premium. By purchasing a plan now, you can guarantee your “insurability” for the future. You won’t have to stress about higher premiums when you get older and possibly experience health issues. Talk to one of our brokers about the best available policies for you.

What is a beneficiary? Who can be one?

A beneficiary is a person listed on your life insurance policy which is the full or partial recipient of the death benefit provided by the policy. Anyone can be a beneficiary, and there can be multiple beneficiaries on the same plan. Note: No one is automatically listed as a beneficiary, including your spouse and children, so be sure to indicate your beneficiary choice(s) at the time of your policy purchase.

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We are a fully transparent agency, there are no secrets or surprises. We allow consumers to see the companies we represent and allow them to quote prices before they contact us. We want them to know which company offers the lowest prices as opposed to us telling them. Once a program is selected by the consumer or suggested by TopLine, our clients are amazed at the speed in which they are approved for coverage. We have a family mentality that is productive and fun. Our office has almost no turnover, which means you get to know us very well. We are an insurance family, and we treat our clients as an extension of our family, without them, there is no TopLine Insurance.

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