Guide to Term Life Insurance

By Barry Solomon , last updated September 12, 2011

Term life insurance is the least expensive way of securing coverage protecting your beneficiaries in the event of your death. It provides a death benefit, should you expire during the term, which is usually from one to thirty years. Twenty years is the most common term. Level premium term life insurance guarantees the premium rates to be the same for the life of the policy and it is the most common form of term life.

It is available with coverages from as low as $50,000 and up to $20,000,000 or even more. Return of premium term life insurance has higher monthly premiums, but will return the full amount of the premiums invested upon expiration of the policy. The insurance carriers can do this because they are investing the premiums and will benefit from the earnings on them over the years of the term. And, obviously, if the premiums are being returned, the policy holder survived the term and there is no payout of a death benefit.

If you are a standard risk, this process is very simple and it is even possible for you to secure the policy by going online and filling out a form with approvals averaging about 15 minutes. If you are a substandard risk, the process is more complicated. However, you can still get a policy from certain companies with a higher annual premium to compensate them for taking the risk.

Term life insurance is usually taken to cover certain specific risks. If you want to insure that funds are available to pay for a college education for a dependent in the event of your death, then figure out the full tuition obligation and the date when your dependent will graduate. That will allow you to calculate the amount of coverage needed and the required term. If you want to provide funds to maintain the lifestyle of your family in the event of your death, the term will be determined by the amount of time you will need to save for a retirement fund that can earn enough to cover your family's needs and that will be the amount and the duration of the term necessary.

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