What is term life insurance?
Term life insurance is designed to cover you for a defined length of time, also known as a ‘term’, and makes sense for those who do not need permanent life coverage.
Term coverage is ideal for temporary protection of financial obligations such as a mortgage, education costs, or income replacement during the working years. You can typically get term coverage anywhere from 10 years to 30 years, although 20 years is the most common. At Legal & General America (LGA), we’re one of the few insurance carriers who offer up to 40 years of term coverage. Our term life options include 10, 15, 20, 25, 30, 35, and 40-year policies.
The most popular type is level term life insurance, meaning your payment (premium) and payout (death benefit) stays level, or the same, until the end of the term period. This is the most straightforward of life insurance options and requires very little maintenance for policy owners.
How does term life insurance work?
When you buy a term life policy, you agree to pay the insurance company a regular payment for the desired period of time. In return, the insurer guarantees that your beneficiary will receive a tax-free* payout if you were to pass away during the policy’s term.
Your loved ones will receive the death benefit amount typically in the form of a lump sum cash payment. They can spend the death benefit to cover a mortgage, funeral expenses, or perhaps pay for college or any other financial obligations. And, the money doesn’t have to go to one person. For example, you could give 50% to your spouse and split the rest among your adult children, a parent, a friend, or even a charity.
*In some instances the death benefit may not be tax-free, learn when life insurance is taxable.
Let’s see how a term life insurance policy would work in a real-life scenario:
Let’s say you’re 35 years old and working full-time along with your partner to provide for your two young children. You want to protect your family’s income if something were to happen to you. So, based on your needs, you decide to purchase $1 million worth of level term coverage for a period of 20 years.
You estimate that this amount of protection would be enough to replace your income and help your family live a comfortable life while paying the mortgage, monthly expenses, and college tuition. Owning a level term policy guarantees you pay the same premiums during the policy’s term. You like knowing that you have predictable financial protection with a death benefit.
If you pass away at any point while you are covered with the 20-year term, the insurance company will issue your beneficiary a lump sum payment of $1 million.
On the other hand, if you outlive the term, you may choose to end or extend your coverage or convert it to a permanent policy. It’s usually around this time that your financial responsibilities decrease, for instance, your mortgage may be paid off and your children may be out of college. If that is the case you may not need the same coverage as you did when you originally applied.
Whatever the case, the term insurance will have served its purpose of shielding your family from financial hardship during those critical years.
Features and benefits of term life insurance
Here’s a quick list of what our term life coverage provides:
- Coverage for a set period of time, ideal for short- and medium-term needs (we offer 10, 15, 20, 25, 30, 35, 40- year options)
- Can be used for income replacement or mortgage protection for your loved ones
- Can pay for all of your final expenses
- Coverage amounts starting at $100,000 with affordable payments to fit your budget
- Coverage available for those aged 20-75 years old, with affordable term life insurance for seniors
- Options to renew or convert to a permanent policy
- Payouts are tax-free
- Ability to customize or “stack” your coverage with term riders
Affordable life insurance policies
When it comes to life insurance policies, the cost is an important factor for many people. The good news is that term life is the most budget-friendly option available.
If you choose a shorter term, you will generally pay less in monthly premiums, but you risk not being covered as long as you need.
You’ll want to be sure you choose an option that balances your need for coverage with your budget. And, life insurance is not as expensive as you might think. According to a recent LIMRA study, more than half of Americans overestimate its cost by as much as three times!
Lock in low-cost coverage
Purchasing life insurance when you are young and healthy can help you get a lower premium which you can keep in place no matter how your health changes later in life.
Most life insurance companies pay attention to your medical history to determine how likely you are to die from health issues. The higher a risk you present to the company, the more you are likely to cost the insurance provider paying claims. This is why life insurance rates can be higher for individuals suffering from chronic conditions like high blood pressure and cholesterol, which affects nearly half of adults over age 20. Smokers may encounter higher premiums than non-smokers.
At LGA, in addition to support from our friendly and responsive team, we offer term life insurance policies for as little as $7 a month.
Customize coverage with life insurance riders
There are various reasons why LGA’s term insurance is one of the most sought-after solutions on the market and one of them is the ability to customize it using riders.
Life insurance riders are add-ons that offer you additional coverage on top of your base policy. Sometimes called laddering, adding riders on your term policy is a way to give you more coverage upfront for a shorter period of time while still maintaining an affordable base term policy.
You can stack one of more than one Term Rider on top of a base term policy for 10, 15, or 20 years. Stacking term coverage is considered to be one of the most cost-effective ways to buy term life insurance. Here’s an example:
Say you purchase $1 million of 40-year term coverage. After 20 years you pay off the mortgage and now you may end up paying for more coverage than need. Alternatively, you could purchase a 40-year term policy worth $250,000 as a base policy and add a 20-year term rider at $750,000 value to get to the $1 million total coverage. Once your rider expires and your financial responsibilities decrease, your original $250,000 term policy will stay in place, without the extra protection or additional cost.
One of the popular riders we offer is known as a Children’s Life Insurance Rider, which covers the lives of your children until they’re 25 years old. This rider provides a death benefit if something were to happen to your child while your coverage is active.
Accelerated death benefit rider
As an added bonus for all our term life policies, an Accelerated Death Benefit Rider is automatically included. Sometimes called ADB for short, this provision allows the policyholder the ability to request a portion of their death benefit in advance if they are diagnosed with a qualified terminal illness. Policyholders can use this benefit to cover medical expenses, funeral planning, or even a last wish or “bucket list” activity to help the family find closure in their time of need.
Bottom line: Customized term life coverage can help you purchase the right amount of protection for the right length of time and may be your most cost-effective way to buy insurance.
Your trusted life insurance partner
More than 1.5 million families and businesses in all 50 states trust us with their life insurance policies. We’re proud to be a top-five provider of term life insurance in the US with more than 70 years of experience.
We pay nearly $1 billion in yearly claims to over 3,500 families and businesses and take pride in knowing that no other national insurer offers more term life options than we do.
Together, we’ll work on finding your best life insurance option, so you can shield your loved ones from the unexpected and protect their financial stability.