Income Protection

Term life insurance provides death protection for a stated time period, or term, and is perhaps the simplest form of life insurance. It was developed to provide temporary life insurance protection for people who are on a limited budget.

Since people can purchase large amounts of death benefit protection for a relatively small premium, it is well suited for short-range goals such as insurance that a loan would be paid if something happened to the borrower before the loan was paid back, or as a supplemental policy to go hand-in-hand with the permanent policy to provide extra life insurance protection for the family during the child-raising years.

Most states have approved the sale of term insurance policies for 5, 10, 20, and 30 year periods.  Companies usually offer policy owners the opportunity to renew the policy when the term expires.  However, the policy continues at the new, much higher premium.  In most states the policy can be extended to age 85 or 95 (age 80 in New York).  Many companies offer what is called a “convertible term” policy.  This policy begins as a term policy at an affordable price, and can be converted, or changed to a permanent, lifetime policy that contains a cash value account.

The premium payment remains the same for the term of the contract.  If you pass away during that time, the death benefit is paid to the person or persons designated as your beneficiary or beneficiaries.  When the term expires the coverage stops.  The monthly premium is very inexpensive for the majority of policy holders because the policy is purchased when they are young and most people do not die at a young age.  Statically less than 1% of term policies are paid out annually.

Term life insurance does not have a cash value account.  No money can be saved in the policy as it can in whole life and universal life policies.