Term Life Insurance Articles
Term Life Insurance Terms To Know
2011-10-15
Overall, term life insurance is fairly easy to understand. This is why it's such a popular option in the United States-anyone can understand the basic terms of their term life insurance coverage. However, some terms are regularly misunderstood. Before purchasing a policy, term life insurance buyers should make sure to understand all terms and conditions outlined in their contracts.
It's especially important to understand term life insurance premiums. Most buyers know that premiums are the amount of money that a policy owner must pay to keep term life insurance coverage active. Policies will often refer to "guaranteed premiums," which are premiums that don't change for a set period of time. Premiums might be guaranteed for the entire length of a policy, as is the case with level term life insurance, or they might vary after a certain period of time. After the term life insurance policy's guaranteed premium period expires, a policy holder will often have the option to continue the policy, usually with higher premiums. This is why short-term life insurance policies are intrinsically less valuable than longer-term policies. Overall, four five-year insurance policies will cost much more than a single 20-year term life insurance policy due to the rising cost of premiums in each renewal period. In some circumstances, a life insurance company may even decline policy renewal outright, unless the policy was set up as guaranteed renewable. Guaranteed renewable policies can always be renewed, although premiums can still rise at the end of each term.
Exclusions are also important to understand, as they're the situations outlined in a contract in which an insurance company wouldn't have to pay out after the policy holder's death. For example, suicide exclusions are quite common and prevent a payout if the policy holder commits suicide within the first few years of an insurance policy. Other exclusions may limit or prevent payouts when a policy holder dies due to an act of war or an undisclosed occupational hazard. Exclusions can be especially important to understand if a policy holder has a high-risk career. These buyers might also consider policies with double indemnity, in which an insurance payout would be larger if the policy holder dies while working. Double indemnity tends to act like the opposite of an exclusion, in that payouts are increased rather than decreased under certain circumstances.
Policy buyers should stay in contact with their insurance companies while reading through their contracts. It's important to ask about any terms that seem unclear. Reading through a policy with a life insurance glossary can also be helpful. By understanding insurance terms, it should be much easier to set appropriate life insurance coverage levels.
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Overall, term life insurance is fairly easy to understand. This is why it's such a popular option in the United States-anyone can understand the basic terms of their term life insurance coverage. However, some terms are regularly misunderstood. Before purchasing a policy, term life insurance buyers should make sure to understand all terms and conditions outlined in their contracts.
It's especially important to understand term life insurance premiums. Most buyers know that premiums are the amount of money that a policy owner must pay to keep term life insurance coverage active. Policies will often refer to "guaranteed premiums," which are premiums that don't change for a set period of time. Premiums might be guaranteed for the entire length of a policy, as is the case with level term life insurance, or they might vary after a certain period of time. After the term life insurance policy's guaranteed premium period expires, a policy holder will often have the option to continue the policy, usually with higher premiums. This is why short-term life insurance policies are intrinsically less valuable than longer-term policies. Overall, four five-year insurance policies will cost much more than a single 20-year term life insurance policy due to the rising cost of premiums in each renewal period. In some circumstances, a life insurance company may even decline policy renewal outright, unless the policy was set up as guaranteed renewable. Guaranteed renewable policies can always be renewed, although premiums can still rise at the end of each term.
Exclusions are also important to understand, as they're the situations outlined in a contract in which an insurance company wouldn't have to pay out after the policy holder's death. For example, suicide exclusions are quite common and prevent a payout if the policy holder commits suicide within the first few years of an insurance policy. Other exclusions may limit or prevent payouts when a policy holder dies due to an act of war or an undisclosed occupational hazard. Exclusions can be especially important to understand if a policy holder has a high-risk career. These buyers might also consider policies with double indemnity, in which an insurance payout would be larger if the policy holder dies while working. Double indemnity tends to act like the opposite of an exclusion, in that payouts are increased rather than decreased under certain circumstances.
Policy buyers should stay in contact with their insurance companies while reading through their contracts. It's important to ask about any terms that seem unclear. Reading through a policy with a life insurance glossary can also be helpful. By understanding insurance terms, it should be much easier to set appropriate life insurance coverage levels.
