How to Shop for Term Life Insurance

There are two basic types of life insurance - term and permanent. Permanent is commonly whole life, but also includes variants like universal and variable life.

Permanent insurance means that as long as the purchaser continues to pay the premiums they will have lifelong protection. The beneficiaries receive a payment when the policy holder dies. Term life insurance means that the purchaser is only covered for life insurance for a specific length of time. Usually the term is between one and thirty years.

Term insurance comes in three different categories. They is standard term, level term and decreasing term. Standard term features premiums that increase every year. With a level term policy, premiums remain the same throughout the duration of the policy. A decreasing term policy, however, means that the death benefits are lowered, usually in one year increments, as the policy ages. The majority of term policies are standard or level term.

People select term life insurance if they have a risk that will eventually go away - such as education fees or a mortgage payment. Term life insurance policies are usually less expensive than a permanent insurance policy. However, the premium payment will increase as the age of the purchaser increases. Premiums can be fixed for the term of the contract or they can vary, usually year to year.

Term life policies can also be purchased that can be renewed after they exprie. Some can be converted to permanent policies. Another option that is available is a return of premium option. This feature usually comes with more expensive premium payments; however, all or a portion of the premiums will be returned at the end of term if no claim has been made against the policy.

It is important when shopping for term life insurance to review all of the policy options and make sure that they meet the purchaser's needs. The term period should be considered and also the coverage level required.

Once the basic needs of the purchaser are understood, the best thing to do is to shop around and compare multiple quotes. Often the easiest way to do this is online. It is also important that the insurance firm's financial strength is good. One way to get an independent view of a company's financial health is to review its ratings. Independent ratings agencies, such as Standard & Poors, evaluate companies and publish their findings so that consumers can easily compare two or more firms.

Usually, the best type of term life insurance policy to select is one that is guaranteed renewable. This means that regardless of the policy holder's health, the contract can be prolonged. Fixed premium policy is usually more cost effective than variable premium policies. Those shopping for insurance, however, should be careful that the fixed premium is fixed for the life of the term and not just for the first few years.

Once you purchase term life insurance, it is important to reevaluate your insurance needs periodically. It is recommended that the coverage is reviewed at least once every five years or when the policyholder has a major life event, such as a marriage or a birth.