What is the life insurance term?
[social_share]The word “term” in life insurance has a very specific meaning. It means the length of time for which a person is insured. During that time the life insurance terms can not be altered by a life insurance company, even if the person becomes ill.
The word “term” is so important that it even defines the most common type of life insurance, which is known as “term life insurance”. This life insurance covers a person for a number of years, which can be as low as six months and can be as high as twenty five years. The life insurance usually only pays out if the insured person dies during this time and there is usually no payment of any lump sum at the end of the policy as there are with other types of life insurance. Term insurance is the type of life insurance that is most obviously comparable to other types of insurance.
As well as paying on death, some term insurance will pay if there is a disability. This can affect the cost of a term insurance policy. There will be different types of cover depending on how much work the disability impairs, an insurance policy that pays out only when a person is unable to work will cost less to take out than one that pays out when a person is unable to continue in their current line of work.
The cost of life insurance is very much affected by the term of the life insurance. The longer the term of the life insurance is the higher the cost per year will be – even allowing for an administrative saving. This is because as people get older then their chance of dying in a particular year tends to get higher as they are more likely to get ill. This will mean that there is a calculation made on the factors that they know about, including parent’s lifespan, previous medical conditions and lifestyle factors such as smoking.
Longer life insurance terms can save money as although the initial premiums will be higher, the premiums at the end compared to a new life insurance policy can be considerably lower. This is particularly the case if a condition is developed during that time. In this case the insurance company still covers the life insurance even though the insurance costs and risks are considerably higher for the firm.
