Term Life Insurance Articles
Three Reasons That Term Life Insurance Still Remains Affordable
2011-01-20
Term life insurance is affordable insurance that's easy to understand. You pay a fixed premium for the length of the term. If you die during the term, your estate gets the amount covered by the policy. If you don't die, you can renew your policy for another term at a higher rate or simply cease carrying the policy. Term life insurance quotes are based on age, gender, health condition, and smoking status for typically 5, 10, 20, or 30 year terms. For a number of reasons, term life insurance remains affordable.
The most obvious reason for the affordability of term life insurance is that there's a low possibility that the insurer will have to pay a claim. The possibility is estimated to be as low as 1%. By contrast, permanent life insurance policies pay out at a rate of 100%. Term life insurance is purely risk protection. Because the risk of pay-outs is so low, the insurance company can keep term life insurance premiums low.
A second reason for affordable insurance is that claims are not contestable. Because the policy is paid out only in the case of the death of the policyholder, complicated settlements or drawn-out disputes are virtually non-existent. For insurers, this reduces the administrative costs of term life insurance, thus reducing costs to policyholders.
The pre-determined term of a term life insurance policy acts as the third reason for its lower cost. When the term of the policy ends, the insurer can renew the policy at an increased premium for the policyholder; a premium based on new factors such as the policyholder's increased age or changed health condition. This built-in limit to risk lowers costs for the insurer and thus for policyholders.
If the risk of paying out on the policy during its renewed term is too great, the insurer can refuse to renew it. However, many insurers offer policies that include provisions for automatic renewals regardless of insurance risks. As can be expected in such an option, the higher premium rates are often very high. Because several options are possible, it pays to shop around for life insurance quotes.
Term life insurance is an affordable way to buy protection during critical years of your life, like when you're trying to provide for a growing family. It pays to shop around and to use an insurance broker who can help you understand the options and renewal provisions. As with any policy, read and make sure you understand the fine print. Cheaper policies may not pay out in certain causes of death, or they may contain renewal provisions that won't work for your situation.
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Term life insurance is affordable insurance that's easy to understand. You pay a fixed premium for the length of the term. If you die during the term, your estate gets the amount covered by the policy. If you don't die, you can renew your policy for another term at a higher rate or simply cease carrying the policy. Term life insurance quotes are based on age, gender, health condition, and smoking status for typically 5, 10, 20, or 30 year terms. For a number of reasons, term life insurance remains affordable.
The most obvious reason for the affordability of term life insurance is that there's a low possibility that the insurer will have to pay a claim. The possibility is estimated to be as low as 1%. By contrast, permanent life insurance policies pay out at a rate of 100%. Term life insurance is purely risk protection. Because the risk of pay-outs is so low, the insurance company can keep term life insurance premiums low.
A second reason for affordable insurance is that claims are not contestable. Because the policy is paid out only in the case of the death of the policyholder, complicated settlements or drawn-out disputes are virtually non-existent. For insurers, this reduces the administrative costs of term life insurance, thus reducing costs to policyholders.
The pre-determined term of a term life insurance policy acts as the third reason for its lower cost. When the term of the policy ends, the insurer can renew the policy at an increased premium for the policyholder; a premium based on new factors such as the policyholder's increased age or changed health condition. This built-in limit to risk lowers costs for the insurer and thus for policyholders.
If the risk of paying out on the policy during its renewed term is too great, the insurer can refuse to renew it. However, many insurers offer policies that include provisions for automatic renewals regardless of insurance risks. As can be expected in such an option, the higher premium rates are often very high. Because several options are possible, it pays to shop around for life insurance quotes.
Term life insurance is an affordable way to buy protection during critical years of your life, like when you're trying to provide for a growing family. It pays to shop around and to use an insurance broker who can help you understand the options and renewal provisions. As with any policy, read and make sure you understand the fine print. Cheaper policies may not pay out in certain causes of death, or they may contain renewal provisions that won't work for your situation.
