Term insurance provides coverage for a set period of time with a fixed face value, and premiums can be guaranteed or subject to increase. Premiums vary based on individual circumstances and coverage needs, and a medical exam is often required. Term insurance is generally less expensive than permanent insurance policies and should cover at least six to ten times the insured’s annual income.
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 during the selected period. Life insurance terms can range from one year to 30 years or more, but most commonly, term coverage lasts 10, 15, or 20 years. It provides temporary protection and does not create cash value.
Many term policies are sold with guaranteed premiums that never increase during the coverage period. However, some offer no premium rate guarantees, and the insurance company may increase the premium during the specified coverage period. Premium increases are intended to account for the increasing probability of death of the insured in a given year.
The amount of premium charged for a term insurance policy will vary, depending on the particular 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 applications may be rejected due to health problems 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 usually less expensive than annual renewable term policies, even for longer coverage periods.
The amount of insurance an individual needs depends on many factors, including their estimated funeral costs, debts, and the long-term needs of any dependents. If the insured is married with children, their coverage needs are likely to be higher than those of a single person with no dependents. Generally speaking, however, a life insurance policy should cover at least six to ten times the insured’s annual income.
To apply for term insurance, an individual usually needs to fill out an application and provide answers to pertinent questions. Often these questions are of a personal medical nature and a medical exam is often required as well.
Usually performed by a licensed medical professional, this exam is intended to assess the applicant’s health and help the insurance company determine the level of risk inherent in insuring the individual. Additionally, blood and urine tests are also frequently required when applying. Some companies offer term policies without requiring a medical exam, but there is usually a limit to the amount of coverage provided and premiums are higher without an exam.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
