Level Term Life Insurance for 21st Century Shoppers

Level Term Life insurance is not the same product that it was in the mid-twentieth century although it remains one of the least expensive types of policies you can purchase. If it fits your needs, it can be an even better option than it was for your parents or grandparents. request life rates now >>

The first Term Life insurance policies were annually renewable. An individual could purchase a policy that would provide suitable coverage for a little as $1.00 for the first month's premium. Subsequent months in the first year might be less than $20.00. The face value remained the same from one year to the next, but the premium increased. The increases were moderate in the early years of the polices, but as clients aged, the increases also grew steeper resulting in the lapse of many policies. Still, this alternative was better for most than the decreasing term offered by the banks as mortgage life insurance.

Most modern life insurance companies offer the newerand much improvedform of Term Life called "level Term." Today, "level" means that both the premium and the face value remain unchanged for the life of the term which ranges from 5 to 30 years. From the company perspective, the policy is actually an ART, but the cost of providing insurance for the contracted period is averaged out over the entire period. Cash, which is unavailable to the client, accumulates in the early years of the policy and is used to pay the higher cost of insurance in the later years of the policy.

The term available to a given individual depends on the person's age as well as the terms offered by a particular company. For example, a person who is 60 years old or older may find it difficult to purchase a 20 year term and may have to settle for 10 or 15 years. Furthermore, most Term policies cannot be renewed after a certain ageoften 80 or 85.

The average consumer today is most familiar with "level term," but Term Life may be offered with a variety of modifications. In order to capture a larger share of the market, some companies offer a "modified" term, meaning the benefit remains level, but the premium increases in 5 or 10 year bands, terminating at age 80 or 85.

An older type of Term that has reappeared in the last few years is "return of Premium" Term Life, known as ROP Term. In this variation, you pay for a rider and are then guaranteed a return of your premium at the end of the term, including the money you paid for the rider itself. Independent financial gurus advise against purchasing ROP Terms as the premium can be from 2 to 6 times higher than a standard Level Term. Furthermore, the return of premium is exactly thatyour premium with no interest paid. If you drop the policy before the end of the term, you may be ineligible for the return; also, if you take the return on your premium, you cannot renew the policy. Thus, you may be completely without life insuranceand, if your health has declinedmay be unable to purchase a new policy. Insurance advisors suggest purchasing a universal rather than an ROP Term.

Finally, Term policies are available as riders on whole life and universal policies. This allows a person to purchase a smaller face valueand pay lessfor the whole life portion, but increase the face value to the mount needed during working years with the addition of a Term rider. For example, it is possible to purchase Whole life of only $50,000, and add a Term Rider of $200,000 or more. The rider will automatically drop off at the end of the Term, but the whole life portion with its own cash value will continue to maturity.

For younger people who need life insurance but simply have their money going into too many baskets, Term Life remains an attractive option. We do, however, recommend that you spend some time with a knowledgeable agent so you understand exactly what the company is offering.