There are many kinds of life insurance policies available to American’s, and term life insurance is for the most part considered the most affordable of all. Generally, a life insurance policy will pay money to the designated beneficiaries upon the insurer’s death. Some of the more popular kinds of life insurance are variable, whole, and term life. With a whole term or variable term, a percentage of the premium is held in an investment fund. With term life insurance, not one cent out of the premium is used for investment reasons. Basically, the insurance is paid for by the premiums with a term policy.
Term life policies are the most affordable form of life insurance, especially at the start. For example, a 35 year old woman might pay $3,000 per year for a whole life term policy with a death benefit payout of $300,000. However, this policy in the form of term life insurance could easily only total to a small $300 a year, but the whole life policy premium will never increase over time and will even carry a cash build up, which the insurer may borrow, use or spend anytime at their own discretion. Premiums for the term policy will go up as the insurer ages. For example, when the 35 year old woman hits her 75th birthday, her annual premium for the same policy could be up to $14,000 a year, as opposed to the small amount of $300 paid when the policy was first purchased.
Most purchases prefer term insurance to provide themselves and their loved ones with the security needed after their passing, and additionally, use the excess funds they would have ended up paying into a variable or whole life fund, and make investments to their personal liking. Basically, they’re also acquiring life insurance and also using their funds for investment reasons such as college funds, IRA’s, and homes; but simply spending their funds in a way that caters specifically to their financial needs.
As is the case with the majority of insurance plans, a term life insurance plan requires the insurer undergoes a simple physical exam by a nurse, usually including blood work, to make sure the client is insurable. The policy shall remain intact as long as the premiums remain paid in full. Out of all the term policies, the more popular forms are 7 year, 10 year, and annual policies. 7 and 10 year policies are accompanied by premiums that stay the same for at least 7 to 10 years at a time, while an annual term policy carries a premium that will slightly increase once a year.