Features of a Term Policy
Term life insurance is very different from whole, universal, and variable coverage in its cost, permanency, and purpose. Read on to learn about the unique features of term life insurance.
Term Life Coverage Is Temporary
All life insurance coverage either classifies as a term policy or a permanent policy. Permanent policies include whole, variable, and universal life. In contrast to permanent policies, a term policy gives the insured time-limited protection. In other words, term life coverage only lasts as long as the specified term. As soon as that term is up, the policy and the coverage expire unless the policyholder renews. When you get term life insurance estimates, you will need to specify the term you would like, such as ten years, twenty years, etc. Generally, policies with longer terms will result in more expensive term life insurance quotes.
Term Life Coverage Is Affordable
You'll see when you view term life insurance estimates that a term policy affords the largest amount of coverage for the smallest cost. Consumers who are on a tight budget typically purchase term life coverage because policyholders get the most value for their premiums. On the other hand, if you choose to renew your term life policy in the future, your rates will likely rise drastically. Term life premiums increase significantly as the policyholder ages, while the premiums of permanent life insurance policies remain the same forever.
Term Life Does Not Build Cash Value
One of the reasons why term life insurance estimates are more affordable than those of other types of coverage is because the policy has no value aside from the death benefit. Other types of life insurance coverage build cash value over time. By contrast, term life policies cease to have any value once the coverage period expires. This means that term life policyholders will not have the option of making cash withdrawals from their policies or borrowing against the value of their policies.
Term Life Is Not an Investment Vehicle
Whole, universal, and variable life insurance policies all invest part of the policyholder's premiums in order to grow the cash value of the policy. These investments typically include stocks, bonds, and mutual funds. If you would like to use your life insurance policy as an investment vehicle, you should not solicit term life insurance estimates. With term life, all of your premiums go toward the cost of the policy's death benefit, not investments.