Term Life Insurance
Level term coverage for 10 to 30 years for residents of Texas, Colorado, South Carolina and Michigan.
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Term life insurance pays a death benefit if the insured person dies during a set period, called the term. When the term ends, the coverage ends unless the policy is renewed or converted. Because it builds no cash value, term is the simplest kind of life insurance coverage and carries a lower premium than permanent coverage for the same face amount.
How Term Life Insurance Works
You pick a face amount and a term length, often 10, 15, 20, 25 or 30 years. The Texas Department of Insurance life insurance guide notes terms can run from one year to 30 years or longer, and most companies offer term coverage only up to a certain age, usually 70 or 80.
- Level term: the death benefit and the premium stay the same for the whole term.
- Decreasing term: the death benefit drops over the term, usually each year. It is most often matched to a loan balance.
- Renewable term: lets you extend coverage at the end of the term without new proof of health, at a higher premium based on your age then.
- Convertible term: lets you trade the term policy for permanent coverage without a medical exam, within the conversion window.
- Return of premium term: pays back premiums if you outlive the term, with a higher premium.
Who Buys Term Life Insurance
Term is built for needs with an end date. Parents raising children, a household carrying a mortgage, a business partner covering a buy-sell agreement, a borrower with a large loan. A 30-year term bought when the youngest child is born covers the years that child depends on the parents' income. A 20-year term can match the years left on a home loan.
Underwriting looks at age, health, tobacco use and risky hobbies. Depending on the policy, the insurer may ask health questions, request records from your doctor or send a medical professional to your home to check your health. Policies that skip detailed health information usually carry a higher premium and a smaller face amount.
Term Life Insurance in Texas, Colorado, South Carolina and Michigan
Valor Life Benefits writes term coverage for residents of Texas, Colorado, South Carolina and Michigan. Each state's insurance department licenses the agents who sell it. Every policy includes a refund window after delivery, usually stated on the first page, when you can return it for a full refund. The Texas Department of Insurance gives the Texas window as at least 10 to 20 days, depending on the policy.
When comparing term policies, look at more than the first-year premium. Check the renewal rules, how long the conversion option lasts and which permanent policies you can convert into, and whether riders such as a waiver of premium for disability or an accelerated death benefit are included.
Term Life Insurance Questions
Are life insurance rates locked in?
On a level term policy, yes, for the length of the term. The Texas Department of Insurance guide says term premiums stay the same for the entire term and go up if you renew, because the renewal premium is based on your age at renewal. Buying a longer term keeps the original premium in place longer.
How does life insurance conversion work?
A convertible term policy lets you exchange it for a permanent policy from the same company without a medical exam or health questions. The new permanent premium is higher than the term premium. Companies usually allow conversion only for a limited time, often until about age 65, so the deadline in the policy matters.
Should I keep my term life insurance policy?
Do not cancel an existing policy until a new one is approved and in force. Michigan's insurance department points out that a new policy starts a new two-year contestable period and its premium is based on your current age and health. If you still have people depending on your income or a balance on the house, the coverage is usually still doing its job.
Do life insurance rates jump at 40?
There is no single jump at 40. Premiums are set by your age when the policy is issued, your health, tobacco use and the amount and length of coverage, so each birthday before you apply adds a little. What changes the premium on a policy you already own is renewal at the end of the term.