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If you are looking for an affordable way to get a life insurance policy, then term life insurance may be right for you. An affordable alternative to the more expensive whole and universal life insurance policies, term life can provide you the coverage you are looking for. Find out how affordable term life insurance can be by getting FREE, no-obligation quotes from leading life insurance providers when you visit NetQuote.

A term life insurance policy is ideal if you only need coverage for a set amount of time, as the policy will expire after a specific number of years. Unlike a whole life insurance policy, a term life policy does not stay active as long as you pay the premium. Rather, it is active for the amount of time specified in the contract. Typical periods a term life policy is active for is between 10 and 30 years. Policy premiums are fixed for the length of the policy and are usually much more reasonable than a whole life policy.

Once the term life policy has expired, it is not guaranteed that you will be able to renew your coverage. While most life insurance companies do not allow you to renew a term life policy, those that do usually will require a very steep premium increase. For this reason, if you need life insurance coverage indefinitely, term life insurance is not for you.

However, most term life policies can be converted to a whole life policy while they are active. This gives the insured the ability to get lifetime coverage, should they decide they need it down the road. However, the premium will most likely increase if the policy is converted, and a complete medical exam will probably be required before the conversion is approved. So, if you think there is a good chance you will convert your term policy to a whole life policy, you are probably better off just starting with a whole life policy to begin with.

A term policy has no cash value, unlike a whole or universal life policy. This means that if the insured were to cancel their policy, they would not be able to receive a cash payout. A term policy only provides a death benefit and has no investment properties tied to it, which is why it is the most affordable life insurance option. All of the premiums paid on a term policy go towards funding the death benefit, since there is no cash value associated with this coverage types.

There is a fixed death benefit associated with a term policy. This means that if the named insured were to die when the policy is in force, the coverage provider will pay the face value of the policy. The death can occur 1 month after the policy went into affect, or happen 1 month before the policy expires - it doesn't matter and the policy would pay out the exact same amount.

Term life insurance policies are great if you only need life insurance coverage for a set amount of time. For example, if you plan on being retired by a certain age and able to draw a pension that would be available for your family if something were to happen to you, consider purchasing a term life insurance policy that will last until you are of retirement age. This may be a very affordable way to get the coverage you need for the period of time you desire, rather than paying considerably more for a whole or universal life insurance policy.

Please see the table below to compare the three major types of life insurance policies - term, whole, and universal. As you can see, there are some distinct differences between the policy types, each serving its own purpose. Choose the one that best fits your estate planning needs and get the protection your family needs today.

Visit NetQuote today to get FREE, no-obligation term life insurance quotes from leading life insurance companies.



Life Insurance Types Compared


Term* Whole** Universal***
Fixed Premiums - The amount the insured pays for coverage does not change as long as the policy is in force. The premium is set when the policy is started, and that amount is paid each month, quarter, year, etc. (depending on the payment interval chosen). checkmark checkmark no-x
Variable Premiums - With a universal policy, there are no fixed premiums. Generally, you pay what you want, when you want. Insurance company premiums are withdrawn from the cash value of the policy. Therefore the insured must maintain enough cash value to cover premium expenses, or the policy will lapse. The flexibility of premium payments makes universal policies better investment instruments than whole life policies. There are IRS regulations regarding amounts paid to universal policies, so the insured must be aware of these federally mandated limits. no-x no-x checkmark
Fixed Death Benefit - The amount that will be paid upon the death of the insured, assuming the life insurance policy is in force, will not change during the duration of the policy. The death benefit is the same if the insured dies 6 months after the policy starts, or if they die 6 months before the policy terminates. checkmark checkmark no-x
Flexible Death Benefit - With universal life, the death benefit may be changed by the insured. However if it is increased, a current medical exam may be required. Also, many coverage providers allow flexibility in death benefit options (discuss the options with the provider to better understand what is available). no-x no-x checkmark
Permanent Coverage - As long as premiums are paid, coverage will be maintained. no-x checkmark checkmark
Temporary Coverage - Term life insurance is in force for a set period of time, such as 10, 20, or 30 years. The insured chooses the time period when setting up the policy, and the policy remains in force during this time period as long as the premiums are paid. Once the time period is up, there may be several options to convert it to permanent coverage. There may also be a conversion option available throughout the term of the policy. checkmark no-x no-x
Maturation - Whole life insurance policies are said to "mature" when their cash value equals the face value of the policy. Once a whole life policy matures, it pays out its death benefit (which is really its cash value upon maturation). Most whole life policies are designed to mature when the named insured is 100 years old, though policies maturing at age 125 are becoming more popular due to increases in life expectancy. no-x checkmark no-x
Price - Typically, term life insurance is the most affordable coverage, followed by universal life, with whole life insurance being the most expensive. cheap expensive moderate
Cash Value - An investment account that grows over time. A portion of the premium for whole life goes to cash value, while all of the premium for universal life goes to cash value (less any front-end loading, if applicable, and provider fees/costs are taken from the cash value amount). At any time, an insured may cancel their policy and claim its cash value, less any surrender fees. Or, a loan might be able to be taken out against the cash value amount. In addition to these options, a universal policy gives a withdrawal option where funds from cash value can be taken out to never be repaid, reducing the cash value amount. no-x checkmark checkmark
Interest - The interest rate at which the cash value of a whole policy grows is a guaranteed, fixed amount. Universal policies guarantee a minimum interest rate, with the possibility of an increased rate that is tied to the stock market. Your universal policy's interest rate will never fall below the guaranteed level, with the possibility of actually getting a higher rate, depending on market conditions. no-x checkmark checkmark

* Term Life Insurance - Term life policies are generally used as a tool to provide financial protection for a set period of time, which usually corresponds to a life event. For example, if the insured has a 30 year mortgage, they might want to carry a term policy of equal length so that their mortgage is paid off should they die. Or, a person may have a term policy equal to the length of time they plan on working, so if they were to die, their surviving family members would not be without a source of income.

** Whole Life Insurance - Whole life policies are for people that want a permanent solution that gives them a guaranteed death benefit and a fixed rate of growth for cash value, while maintaining a fixed premium. A whole life policy can be used as both a way to guard against loss of income should the insured die, but also as an investment platform should the insured live a "normal" length of time.

*** Universal Life Insurance - Universal life policies are permanent coverage solutions designed to provide coverage for the entire life of the insured, with an investment component available. They are a bit different than whole life policies in that there is more flexibility in the way premiums are paid, and there is the possibility of getting a higher interest rate than the guaranteed rate.





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