What is term insurance?
Long-term insurance is a type of life insurance that provides constant coverage for a specified period of time. The face value of a level term policy remains the same for the selected period. Life insurance terms can range from one year to 30 years or more, but term coverage is most commonly 10, 15, or 20 years. Provides temporary protection and does not create cash value.
Many long-term policies are sold with guaranteed premiums that never increase during the coverage period. However, some do not offer premium rate guarantees, and the insurer may increase the premium during the specified coverage period. Premium increases are intended to account for the increasing probability of the insured's death in a given year.
The amount of premium charged for a term insurance policy varies depending on the specific insurance company and the applicant's unique circumstances. Certain lifestyle choices, health conditions, and occupations may cause the insured to charge higher rates, and in some cases, insurance claims may be denied due to health issues or other risk factors. However, there are some insurance companies willing to insure higher risk applicants.
Term insurance premiums are generally lower than permanent insurance policies. The length of the coverage term directly influences the premium charged, with higher premiums generally charged with longer terms. However, this type of insurance is often cheaper than annual renewable-term policies, even for longer periods of coverage.
The amount of insurance an individual needs depends on many factors, including estimated funeral costs, debt, and the long-term needs of any dependents. If you are married and have children, your coverage needs are likely to be greater than those of a single person with no dependents. Generally speaking, however, a life insurance policy must cover at least six to ten times the insured's annual income.
To apply for term insurance, an individual usually needs to fill out a form and provide answers to relevant questions. Often these questions are of a personal medical nature and often also require a medical examination.
Usually performed by a licensed medical professional, this examination is intended to assess the applicant's health and help the insurer determine the level of risk inherent in the individual's insurance. In addition, blood and urine tests are also often required when applied. Some companies offer long-term policies without requiring a medical exam, but there is usually a limit on the amount of coverage provided and premiums are higher without an exam.