Term Life Insurance Coverage

People who are important to other people or to business enterprises may want to invest in term life insurance. Buying a term life insurance policy can protect a person’s loved ones and his/her/their assets; it can also ensure that a commercial entity can keep on going after its leader dies. Before buying a policy though it’s a good idea to know just what term life insurance is, how it is sold and how it is paid out to the policy’s beneficiary.

Term life insurance provides its beneficiary with a specified dollar amount upon the death of the insured. A term policy does not accrue cash value. In general the premiums for term life insurance go up as the insured ages; however, many term life insurance policies offer stable premiums for a set period of time.

Renewable term life insurance refers to a policy which the insured can renew upon the expiration of its term without any further evidence of insurability. In most cases, the renewal can take place a limited number of times and each time it is renewed the premium will increase.

Evidence of insurability means that the insured meets the health standards required by the insurance company.

Primary beneficiary is the person to whom the proceeds of the insurance policy will be paid upon the death of the insured. The beneficiary will be required to prove both his/her identity and will also be required to provide the insurance company with proof that the insured has indeed passed away, generally a death certificate. Most term life insurance policies also have contingent beneficiaries. A contingent beneficiary receives the proceeds of the policy if for some reason the primary beneficiary is not available.

Face amount of the policy refers to the actual amount for which the policy was written. This amount may be different from the amount which is eventually paid out upon the death of the insured for a variety of reasons such as riders or limited liability clauses.

Riders are attachments to a term life insurance policy which may increase the value of a policy or, in some cases, waive certain types of coverage.

Limited liability clauses may be in affect for a term life insurance policy to protect the insurance company from the insured’s death by suicide during the first two years of the policy or from certain prohibited activities throughout the life of the policy.

Level term life insurance policies have premiums and death benefits which remain the same throughout the period of time covered by the original policy.

Decreasing term life insurance refers to a policy in which the premiums remain the same over the life of the policy but the face value of the policy decreases over the life of the policy.

Increasing term life insurance is a policy in which the benefit increases during the term of the policy. Term life insurance of this sort is generally acquired via a rider to the original policy.

Underwriter is the company which guarantees the payment of benefits to the beneficiary. The underwriter also accepts the term life insurance premiums during the life of the policy.

Insurance company ratings are established by examining among other criteria the financial stability of the company, its overall performance and its record of paying benefits. There are five major ratings for term life insurance companies. Many people will not consider writing a policy with a company rated less than A.