If your main goal is to provide relief to family members you’d leave behind if the unthinkable happens, then term life insurance is worth exploring.
What is term life insurance?
Term life insurance is a contract with an insurer to provide coverage for a specific period or “term,” usually between 10 and 30 years. The premise is simple: You pay a premium, and if you pass away while your policy is active, a predetermined death benefit amount is paid to your beneficiaries.
If you (hopefully) outlive the term, there is no payout and the policy simply expires. However, you’ll enjoy peace of mind for the duration of the term knowing you have helped to take care of your loved ones financially.
Because of how term life insurance is structured, it’s typically the more affordable type of life insurance. As such, it’s often the life insurance of choice for people whose main goal is to help ensure that their families are left financially secure in case of their untimely death.
To help you decide if term life insurance is right for you, learn more about how it works, the different types available, and how to determine how much insurance coverage you actually need.
How Term Life Insurance Works
Obtaining a term life insurance policy begins with filling out an application with an insurance provider. You will need to answer questions about your personal information, health history, occupation, hobbies, and lifestyle habits. Be honest and thorough with your responses as providing incorrect or incomplete information can lead to policy cancellation or denial of a future claim.
Next, depending on your age, the coverage amount, and the insurer’s requirements, you may need to undergo a medical examination. This usually involves basic tests and checkups. Some insurers offer ‘no-medical-exam’ policies for which you get to skip the visit to the doctor’s office. You’ll most likely need to answer some health questions though.
Once your application and medical exam (if needed) is complete, it will go through the underwriting process. This is when the insurer assesses your risk level based on the information in your application and, if applicable, medical exam results. This process can take a few minutes to a few weeks depending on the process used.
When the assessment is complete, you’ll be offered a policy and premium amount if approved. If you’re happy with the offer, you should carefully read the terms and conditions and coverage details and ask questions if something is not clear. If all looks good, you can sign up and choose your beneficiaries. To activate your coverage officially, you’ll just have to make the first premium payment. You can usually choose to pay monthly, quarterly, or annually, but monthly is most common. And that’s that!
Your term life insurance policy will stay active as long as you keep making payments during the term period. If you experience any major life changes like marriage, divorce, the birth of a child, or buying a house, you’ll want to revisit your policy to make sure it’s still relevant. For example, you might need to purchase additional coverage or update your beneficiaries.
Once the policy term comes to an end, you may have the option to renew or convert the term life insurance into a permanent life insurance policy. Should you pass during the term, however, the insurer will pay the death benefit to your beneficiaries.
