What is term life insurance?
Term life insurance is a type of life insurance policy that provides the payment of a stated death benefit to a beneficiary (or beneficiaries) in the event the insured person dies during a specified term of coverage outlined in their policy. For example, if the insured’s term life insurance policy is set for five years, and the insured dies on year four of the policy, there is a payout. In the event the insured dies on the day after the fifth year closes, there is no payout.
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The longer you wait to purchase term life insurance the more expensive the premium may be.
How does term life insurance work?
When considering how a term life insurance policy works, it’s pretty straightforward. Your premiums are based on the policy (and payout amount), and may also be based on your age, health, and gender. There may be other questions asked to determine eligibility depending on the policy, or a required medical exam, but generally speaking, qualifying for term life insurance isn’t too much of a hassle.
Once you’ve purchased term life insurance, all you should have to do is renew the policy at the end of its term if
it is a renewable policy – ensuring that you’re covered after the term of the policy has expired. With each renewal, prices may go up since age is taken into account for calculating premium costs, which is why it’s important to purchase early.
As for how coverage is paid out, if the insured dies during the time of the policy, the insurer will normally pay the face value of the policy to any beneficiaries listed on the policy – this is called a death benefit. However, as mentioned, if the policy expires before the death of the insured and has failed to be renewed for a term that covers the insured’s time of death, no death benefit will be paid out.
What is the age limit for term life insurance?
Now that you know what term life insurance is and how it works, you may be wondering if there are any age limits in order to qualify. While not every term life product on the market has a maximum issue age, many do. The issue age, if any, will depend on the product purchased. In addition, the longer you wait to purchase term life insurance the more expensive the premium may be.1 Since term life insurance may take health, age, and gender into account when calculating premiums, it can only be expected that premiums go up the more you age. As a result, one may want to consider purchasing life insurance when they're younger to avoid a higher premium.
Term life insurance is a viable and effective form of life insurance that can help protect your loved ones and ensure their long-term financial security long after you’ve gone. However, due to premiums taking into account age, it may be best to start a term life insurance journey at a younger age in order to avoid higher premiums and coverage limitations.