Starting a family? Caring for aging parents? If you have dependents counting on your income, life insurance is more a necessity than a luxury. For families and other people seeking a particular period of coverage, a term life insurance policy provides financial security without requiring a lifetime of premiums. Here's how it works.
What is term life insurance?
A term life insurance policy provides coverage for a specific period of time, or term. You can choose a policy for the stated term and pay scheduled premiums to the insurer during that time. If the unthinkable happens, and you should pass away while the policy is in force, your beneficiary receives the stated value of the death benefit.
How does term life insurance work?
With term policies, you can choose between 10, 20 or 30 years of level premium payments. At the end of the level payment period, the policy is guaranteed renewable to age 95. Although the policy can last until age 95, the premiums will increase significantly every policy anniversary and will likely become unaffordable.
Most State Farm® term policies can be converted without evidence of insurability. This means that during the level term period, and before age 75, you are able to convert regardless of your health to a permanent policy, such as whole life or universal life. Permanent policies are designed to provide coverage for the entire lifetime of the insured person, not just a stated term. New premiums and other conditions may apply.
Cost of term life insurance
Term life premiums are determined by a number of factors, including age, gender, tobacco use and health. For example, it will typically cost less to insure a 30-year-old nonsmoker in good health than it will to provide the same policy to a 45-year-old tobacco user.
Additional thoughts on term life insurance
Unlike permanent life policies, term life policies do not provide cash value. The premiums paid to the insurer are simply the nonrefundable price of coverage for the stated term.
Term life is a sound insurance option for people seeking to provide for their dependents for a set period of time.