A term life insurance policy is a life insurance option available to most people due to its affordability and simplicity. The duration of such a policy generally ranges anywhere from 10 to 30 years. Here’s what you need to know about term life insurance policies compared to annually renewable life insurance policies.
Changes in Life Insurance Rates as You Age
As you age, the changes in your life insurance rates hinge on the type of life insurance policy you purchase. If yours is a level-premium or level-term life insurance coverage, your premiums won’t change throughout the term of your policy regardless of the time frame of your coverage. Even if you take a 30-year term life insurance policy, your premiums won’t change for the next 30 years. Conversely, with renewable term life insurance, your premiums will increase with time.
What’s the Cost of Term Life Insurance Coverage?
The cost of your term life insurance policy will hinge on your health status, age, coverage amounts, and term length. However, the key consideration when choosing a term life insurance policy should be the cash value or the total death benefits your dependents will get in case of your untimely death. Your policy’s cash value guarantees that your beneficiaries will be taken care of in case you die unexpectedly. Therefore, you should choose a term life insurance product that offers an adequate safety net for your loved ones. Your policy’s benefits should be enough to cover your funeral expenses, your loved ones’ daily living expenses, and future emergency costs that your dependents may incur.
What Should You Choose Between a Level and Renewable Term Policy?
Renewable term life policies differ from level term life policies in that the premiums for renewable policies increase over time. This means that with a renewable term life policy, your premiums will change as you get older. Therefore, while renewable term life policy rates may be lower in the short term, the policy may cost you more in the long term as your premiums rise.
When is an Annually Renewable Policy Better than a Term Life Insurance Policy?
If, for instance, you’ve lost your job and want an affordable policy that will temporarily protect your family, a renewable policy may be ideal. This is because a renewable term life policy may be more cost-effective in the short run. However, most people who buy term life insurance need the coverage until they’ve fully paid their mortgage and the kids are self-reliant. If you want a cost-effective life policy that will adequately protect your loved ones for a longer time frame, a level term life policy may be ideal.
What Will Happen to Your Level Term Life Policy Once the Term Ends?
You can extend your coverage if the level term policy comes with a guaranteed renewability component. Typically, you’re allowed to renew the policy yearly, which is great because this allows you to explore other life insurance options. At Donald Weiss Insurance Services, we will help you find a life insurance policy that adequately protects you and your loved ones. Contact us today to learn more.