Your options for life insurance are grouped into two types: permanent or term. It can be a difficult choice to make as both have their benefits, but also some downsides. It makes knowing the answer to what is term life insurance even more important.

Life insurance is essential for those who want to provide financial protection for their loved ones, and term cover could well be perfect for your situation. Let’s look at exactly what term cover is along with everything else you need to know. Let’s get started!

What is Term Life Insurance?

Term life insurance is coverage that lasts for a set period of time, such as 20 years. When that term ends, the policy expires and you’ll no longer be covered. If the policyholder dies during the term, the payout will be made to their beneficiaries.

This is in contrast to permanent life insurance, which you pay every month until you die. That isn’t the only difference, as there are different types of permanent life insurance, and they can get a little complicated. Read on as we look at these differences and the benefits of term life cover.

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Key Features of Term Life Insurance

Here are the key characteristics of term life insurance and how it differs from permanent policies:

Affordability – With the potential of there being no payout during the term, term policies are cheaper than permanent life insurance. This makes them a more budget-friendly choice for anyone worried about the cost of life insurance.

Fixed Premiums – The premium you pay usually stays the same for the entire length of the term. This means you know what you’ll be paying each month. This isn’t always the same with other policies, so term policies give you stability when budgeting.

Simple – Permanent policies have a cash value element which can grow at varying rates, depending on the type you choose. Term policies don’t have this. You just choose your coverage amount and term length, and enjoy the peace of mind.

No Cash Value – That cash value element is separate from the death benefit. While there are advantages to this, it does play a role in the higher premiums. It also means you need to keep an eye on your life insurance rather than letting it run quietly in the background.

How Much is Term Life Insurance?

This is a difficult question to answer as it can depend on a huge range of factors. Young people in excellent health may pay only $15 a month. Elderly people with health issues may be asked to pay over $1,000.

The premium you pay will be determined by a wide range of factors. The main ones are age, health, smoking status, and lifestyle. The amount you want your beneficiaries to receive, known as the coverage amount, will also impact the premium.

The only sure way to know what you’re going to pay is by getting a quote. You can search for one yourself or have an insurance broker do it for you. A broker will search through their range of providers and work with you to get a quote which matches your circumstances.

Related Article: https://www.marathoninsurance.ca/blog/what-factors-influence-the-costs-of-life-insurance/

Why Choose Term Life Insurance?

We’ve already gone over a few key reasons why term insurance is going to be right for you. It’s the most affordable type of insurance so will be the easiest on your pocket. This makes it perfect for those on a budget.

It’s also simple for those put off by more complex policies and offers fixed premiums. The reason that many choose term life coverage is that it provides coverage for specific needs. The best example is matching your coverage to a mortgage to ensure it can be paid if the policyholder passes away.

It’s this financial flexibility that can make term insurance even more appealing. It’s commonly used by homeowners or those with other types of debts. Term policies are also appealing to young families and professionals whose financial situation is likely to improve in the future.

What Happens When the Term Ends?

One common question people have is what happens when the term ends. You generally have three options here:

Renew the Policy – Many policies will allow you to renew your coverage and choose another term. However, due to your increased age, the premiums will almost certainly be higher than what you’d previously been paying.

Convert to a Permanent Policy – Another option commonly given is to convert it to a permanent policy. Again, the premiums are going to be more expensive but this allows you to have the safety net of a permanent policy, often without the need of a medical.

Let the Policy Expire – At the end of the term, you may no longer need life insurance. Here you can simply let the policy expire with no further costs. You’ll also be free to get another policy in the future should you wish to.

Final Thoughts

By now you should have a clear answer to the question of what is term life insurance. It’s a policy with a pre-determined time frame that will pay out should the policyholder die during its term. It’s an attractive option for those looking for a shorter-term or more affordable policy.

Whether or not term life insurance is for you can depend on your specific needs. Give Marathon Insurance a call today and we’ll happily go through your circumstances and find out which policy is the perfect fit for you and your family.