Introduction
You may have heard that, depending
on your policy, term life insurance will end at different ages. This can be
true of several different types of term life insurance policies. However, each
individual policy will decide when your coverage does entirely end. The age of
death for most people is 67 years old so if you kick the bucket after your 90th
birthday, you get to keep the rest of your payout.
The average life insurance term in
the United States is 10 years. This means that term life insurance can
potentially give you up to 10 years of coverage after paying a small premium
each month, which is known as an annual premium.
What
is term life insurance?
Term life insurance provides a fixed
amount of coverage that you can use as part of your overall financial plan. If
you die before your term ends, the company will pay out a death benefit that's
equal to the amount of your policy — but only if they can prove you died
because of an accident covered by your policy.
If we can't prove that happened,
then they'll pay out whatever we've saved over the course of our policy period
minus any outstanding premium balance remaining at the time of loss.
With this type of coverage, there
are no premium payments or annual deductibles; however, there is an annual cash
value limit on how much you can earn on top of any cash values already built up
in your account.
How
term life insurance works
Term life insurance is a contract
between you and your insurer that pays a death benefit in exchange for paying
premiums. The amount of coverage you want and the premium you pay are set when
you buy the policy.
Term insurance can be either whole
or permanent, depending on how long you select at purchase. A term plan may
last anywhere from three months to 10 years.
In order to get the maximum payout
from your policy, it’s important to understand how term life insurance works
and how it compares to permanent coverage.
What
to do if your policy ends before you die
If your policy ends before you die,
there are a few things to do.
1. Make
sure the policy is still valid. If you have paid premiums on a policy for more
than a year, it's likely still in force. However, you should check with your
agent to make sure that it's still available and can be renewed.
2. Contact your insurance company to find out if they will
allow you to renew coverage without paying additional premiums. They may offer
another option such as an advanced premium payment plan or even a
"mini-annuity."
3. If
you want to keep the amount of coverage that you have now but want the same
benefits as if you were still alive, ask your agent about converting your
existing term life insurance policy into permanent life insurance coverage —
which means that payments will continue after your death and can be inherited
by someone else in the event of your death without any tax consequences on
their part (as long as they are left alone for at least 10 years).
Convertible
term life insurance
Convertible term life insurance is
an alternative to whole life insurance that allows you to convert your policy
into permanent coverage at any time without paying a premium. This is called
"conversion" and it's a great way to invest in your future without
having to make a large investment.
The main benefit of convertible term
life insurance is that it gives you more flexibility than whole life does, but
there are some downsides as well. Although the interest rate on Convertible Term
Life isn't as high as that on whole life, if you're looking for affordable
coverage that gives you the freedom to use your money however you want, then
Convertible Term Life may be just what you need.
Convertible term life insurance is a
hybrid product that combines the benefits of both permanent and term insurance.
The policy pays a cash value or annuity, with the amount determined by how long
you've held it. For example, if you hold a policy for 10 years, it will pay you
$100,000 at retirement.
What
are the different types of term life insurance?
There are three types of term life
insurance:
Term life insurance. This is the
most common type of term life insurance. It lasts for the duration of your
life, typically 10 years or less.
Whole life insurance. This type of coverage provides a death benefit in the
event of your death during the term of your policy, provided you never take out
a loan against your policy or borrow from any other source.
Universal life. Universal life provides you with a guaranteed level of
benefits at death, regardless of how much cash value is invested into the
policy. The death benefit is based on the amount that was deposited into the
policy when it was issued, plus interest earned on that amount (which may be
paid out over time).
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