Term Insurance Explained

Life insurance protection that expires after a specified term without any residual value if the insured survives the stated period. The protection period may be as short as 30 days (as in temporary insurance agreements) or as long s 30 years or more. Term insurance may be decreasing as in certain types of mortgage protection or have a level benefit for the period. It may have a level premium or an increasing premium often called Annual Renewable Term. This may be stated on the front cover or the first or second page of your policy. (see sample documents section) (click here for an example of this strategy.) There are in essence dozens of variations of term insurance; one year renewable, 5 year renewable, 10 year renewable etc. Some have increasing premiums and some have 5, 10, 20, 30 year periods of level premium. Term insurance may be the most expensive life insurance you could buy. Why, because less than 1 percent (%) is ever paid in a death claim says a Penn State study completed in the last two years. You pay all the premiums and then when it does get more expensive you cancel the coverage by justifying you don't need it. Imagine if Life insurance had no economic cost to your lifestyle and you could spend it on yourself before you die. The rate of return on your money could reach an average of 12 to 15 percent (%). In addition to the complexity is all the different riders that can be added. The most important in my opinion is the disability waiver of Premium. This rider could guarantee the future success of your entire financial plan or it could spell total defeat and failure. These riders are all different and should be examined to see if there is a probability of receiving the benefit (see Disability Premium Waiver)