This is the second post in this series. The first installment can be read here.

Now that we understand the purpose of life insurance and have established whether or not we need it, we need to look at the various types of life insurance and determine which kind is right for a particular situation. The two main forms are Term Life Insurance and Permanent Life Insurance. Today I’ll be taking a look at term insurance.

What Is Term Insurance

This type of life insurance is pure insurance protection. It is similar in nature to most other forms of insurance in that will satisfy the claim against what is insured assuming that the contract terms are being met and everything is current. As long as the premiums are paid up to date and the policy hasn’t expired, the death benefit will be paid to the beneficiary. It really is that simple.

This type of insurance is called term insurance because the policy is written for a specific time frame, or term. When the term is up, you can just drop the policy altogether or you can renew the policy with increasing premiums.

Term life insurance can be purchased on an annual renewable term where you would renew the policy every year and the premium would increase with every year. A more prevalent way to purchase this type of insurance is to purchase it on a level term that is generally 10, 20 or 30 years. With this type of term insurance the premium remains the same over the term, but it will be slightly higher than the one year because it’s essentially many years rolled into one and the later years premiums will be averaged into the price.

The Cost of Term Life Insurance

Term insurance is the cheapest type of life insurance available because you’re only paying for risk protection for a specific period of time. Since the policy is not guaranteed to pay out (and it rarely does), large amounts of coverage can usually be purchased for a fairly inexpensive premium. If you’re looking for simple life insurance with a low premium, then term insurance is probably the type for you.

In the next article, we’ll look at the other main type of life insurance that’s offered, permanent life insurance.

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