Term life insurance is a temporary life insurance policy that covers you for a specific term or length. A term life insurance policy will provide benefits only within this specified period opted by you. For example, term life insurance is generally taken by employers on their employees to provide life insurance coverage for the duration of their employment.

Term life insurance is your best choice when you require insurance coverage for a specific time period but have only limited budget to finance the policy. In most cases your insurance lender will allow you to convert your term life insurance policy into a permanent life insurance plan.

Types of term life insurance

There are different types of term life insurance policies available depending on your requirements. Take time to study the benefits of each of these policies in order to identify the best term life insurance plan that is ideally suited to your requirement. It is always advisable to approach a professional life insurance lender for advice regarding the insurance plan that is best suited to your specific needs. Insurance policy providers undertake extensive study of your needs and then offer expert advice regarding the plan that is right for your specific requests.

The most common types or term life insurance policies are:

Renewable term life insurance. When you purchase this type of term plan, insurance providers allow you to renew your life insurance at the end of the term period when the policy is due to expire.

Convertible term insurance. By purchasing this type of term life insurance, you can convert your term policy into a permanent policy incase you require permanent coverage after the term policy ends.

Level term insurance. This type of term insurance policy is taken to provide fixed premium for a predetermined number of years.

Decreasing term insurance. In this category of term life insurance your death benefits will decrease over the term.

Term insurance versus whole life insurance

Term insurance covers a person against death for a limited time, the term. You pay for the coverage period and at the end of the term the contract, or policy, expires. If no claims are made against the policy during the term, you don’t receive any benefits after the policy expires, just like auto or homeowners insurance.

Whole life insurance also called permanent insurance, is permanent and does not expire assuming you continue to pay the premiums. While whole life insurance provides coverage similar to term insurance, it also provides an investment vehicle.

A portion of your monthly premium goes toward insuring your life while the other goes toward an investment account. This investment account can be either an interest bearing account or a stocks and bonds investment account.

How much insurance do you need?

Deciding upon the amount of insurance that you need may be difficult to do; as there are many conflicted details. Often the amount of the monthly fee for the policy will be the determining factor.

The general rule of thumb is to insure for 2 to 6 times your income for the period of the policy.

For example, if you have a policy for 1 year and you earn $50,000 a year you would want $100,000 to $300,000 coverage. Even this rule is flexible, as your current needs and situation must temper it. Perhaps your children are about to start university and that the tuition will be $40,000 to $80,000 depending upon the school that they go to. In this case you need to add the cost of the tuition to your income before determining the appropriate amount of coverage you need.

Term life insurance is a valuable tool designed to protect your family and assets for a specific period of time. There are many reasons why you may wish to consider term insurance. Perhaps you are planning on travelling for a year or you are undertaking a new business venture. Term life offers affordable reasonable rates, flexible coverage and peace of mind.