How to Buy Term Life Insurance

Term life insurance, also referred to as term assurance, is an insurance product that provides the maximum coverage for a specific period with a limited budget. In fact, it is the cheapest insurance that offers a temporary risk protection. If the insured person dies within the stipulated coverage period, the death benefit is paid to the beneficiary. To be precise, term life insurance is a pure death benefit, as there are no returns or benefits of the premium in case no death claim has been filed within the term. Considering this, term life insurance is more or less similar to auto insurance or homeowners insurance.

After the completion of the term, the insured person can either drop the policy or continue by paying premiums. The premium amount for the continuation of term life insurance depends on the insurance company norms and risks associated with the insured person. Let's take an example; if the insured acquires a terminal illness during the term, then he/she will be charged with higher premium amount than the initial premium in order to continue the policy.

Buying Term Life Insurance

Term life insurance is an ideal insurance product for the financial responsible persons who do not have sufficient money to purchase other high premium policies outright. A prospective student who has taken an education loan can purchase term life insurance during the course of study. Another example of financial responsible person are those who have mortgage loans, car loans or other personal loans in their name. In such cases, the loan amount can be paid off from the death benefit in case the insured dies within the term, before repaying the loan.

Term life insurance is also opted for supplementing other insurance during periods when financial obligations are on the rise such as child raising and mortgage paying years. Doing so offers more security to the family members. If you are planning to buy a term life insurance, you can collect an information regarding the term policies that will meet your security requirements.

In general, there are two main term life insurance policies, namely, annual renewable term insurance and level term life insurance. In the former type, the insurance term is of only one year and can be continued, whereas in the latter case the term is for specific periods like 5 years, 7 years, 10 years, 20 years or longer. In annual renewable term, the premium amount is increased for the continuation, while in level term life insurance, the premium amount remains the same during the stated term period.

Another new plan is called return-of-premium term life insurance in which the premium amount is repaid after the policy is expired. The premium amount for this plan is about 20-25 percent more than other term life insurance plans. After you decide on a term life insurance plan, you can contact a reliable insurance company and inquire about the premium, coverage amount and period.

It is advisable to go through the policy documents regarding the flexibility of the plan (renewable and/or convertible). If you are non smoking and below 30 years, then a $250,000 term life coverage may cost about $300 annually. Whatever be the plan type of term life insurance, the insurance company may conduct a basic physical examination prior to approving your proposal. This is necessary so as to make sure that the person who is applying for the term life insurance is insurable.

In the physical examination, you have to fill your current age, height and weight. You are also required to undergo basic laboratory tests like blood tests and urine tests. Based on the medical exam results, the premium amount can be increased if you have a higher risk of dying within the term. If everything is sort out between you and the insurance company, the company will issue a term life insurance.