Term Life Insurance
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Way.com: The Better Way to Shop for Term Life Insurance
No Medical Exams
100% Online
Get estimates in seconds
4.9/5 Rating on the App Store
Key Takeaways
Roughly outlining what the insurance means, term life insurance is a type of life insurance policy that provides coverage for a specific period. In other words, it covers a fixed term according to what we've chosen in the policy. However, term life insurance pays out the death benefit to the beneficiary if the policyholder dies during the policy term.
Unlike whole life insurance, a term insurance policy doesn't include the investment component; hence the rates are lower for a term life insurance. Therefore, the policy protects for a specific time, after which it can be renewed or will lapse.
Term life insurance will work as a short-term solution since the premiums are low. Here we look in detail at what term life insurance means and when it becomes the right choice based on your needs.
Term life insurance guarantees that the beneficiaries will get a death benefit if the policyholder dies, but only if the death happens during the policy term period. The steps involved in a term policy are relatively simpler. Here is an outline of how term life insurance works.
Even when term life insurance has the drawback of not providing death benefits outside of the policy period, one can receive them by adding a return of premium rider to a term life policy. This will help you receive the benefits if you outlive the policy term.
Several features make term life insurance preferable to those looking for short-term financial goals or to provide backing to their needs within a specific time. Here are the notable features of term life insurance.
Since the premiums are fixed for the chosen duration and the absence of the cash value component, term life insurance rates are lower; hence affordable than policies like whole and universal life insurance.
Most term life insurance will require a medical exam and underwriting process. This will ensure that the individual is healthy while applying for the policy. The healthier the individual, the lower will be the premium rates.
The policy term is for a specific period between ten and thirty years. The premium rates are fixed according to the policy term.
Term plans allow annual, six-month, quarterly, or monthly payments. Single-pay or limited-pay term insurance plans are also available. The policyholder can select the most affordable and convenient premium payment option.
Pure-term plans may not offer any value at the end of the term. However, term plan with return of premium. If the insured person lives until the end of the policy term, the maturity value is equal to the return of all paid premiums. These will cover both death and maturity benefits.
There is an accelerated death benefit rider that you can use while you're still alive. This is helpful if you are suddenly ill and you need financial assistance. Since it is used when the policyholder is alive, it is also known as a "living benefit."
The final payout of a term insurance policy is tax-free. The death benefits that the beneficiary will receive.
Several kinds of term life insurance provide policies for a set time but with specific payout benefits.
This is the basic type of term life insurance, where the coverage and the premium amount remain the same throughout the policy period. The beneficiaries will receive the death benefits if the policyholder dies during the policy period.
This is when a term life policy can be renewed at the end of the policy term. One doesn't have to provide new health information. Even though the premium rates can increase at the time of renewal, the absence of a medical examination
These policies' death benefits decrease annually on a schedule. The policyholder pays a constant premium. Decreasing term policies are often used with mortgages to match the insurance payout with the declining principal.
This allows term insurance which has a smaller number of years to be expired, to be converted to universal or whole insurance. The policyholder gets lifelong coverage without any medical examination.
Regarding policies, you have to choose the type of term life insurance policy that best suits your needs and budget. However, when it comes to which company to choose, you can choose it based on financial strength, frequency of complaints, customer service, and the regularity in payouts.
Here are the best term life insurance companies based on the term length it offers, AM's best ratings, and the convenience of an online purchase.
| Insurance Company | Term Length | Online Purchase | AM Best Rating |
|---|---|---|---|
| Haven Life | 10, 15, 20, 25, or 30 years | Yes | A++ |
| North Western Mutual | 10 or 20 years | No | A+ |
| Guardian | 1, 10, 15, 20, or 30 years. | No | A++ |
| MassMutual | 10, 15, 20, 25, or 30 years. | Yes | A++ |
| New York Life | 10, 20 years | No | A+ |
| Pacific Life | 10-, 15-, 20-, 25- and 30-years | No | A+ |
| State Farm | 10, 20, 30 years | No | A++ |
| USAA | 10 to 30 years | No | A++ |
The term life insurance rates depend on age, gender, health, lifestyle, and the chosen coverage. For example, the younger the policyholder, the lower the premium rates. Similarly, medical conditions and habits like smoking and drinking can also affect the premium rates. The cost of term life insurance is higher for longer terms.
Apart from the term length, the gender and age of the policyholder play a crucial role in determining the insurance rates. For example, it will cost $134 annually for a 30-year-old female opting for a 20-year term, while it is $152 for a male who has opted for a similar policy.
| Age | ||||
| 20 Year Term | 30 Year Term | 20 Year Term | 30 Year Term | |
| 30 | $134 | $187 | $152 | $218 |
| 40 | $183 | $273 | $210 | $353 |
| 50 | $368 | $613 | $461 | $397 |
| 30 | $190 | $299 | $228 | $354 |
| 40 | $288 | $468 | $336 | $586 |
| 50 | $651 | $1127 | $832 | $1489 |
| 30 | $286 | $475 | $357 | $613 |
| 40 | $482 | $861 | $579 | $1085 |
| 50 | $1136 | $2116 | $1540 | $2849 |
Any insurance protects you financially against unpredictable events in your life. Therefore, having insurance secures your assets and offers financial security for your family. Term insurance, which is for a specific period, has the following benefits.
The short terms and the rate determined according to the coverage options make it less expensive for anyone who wants to purchase an insurance policy.
Outstanding debts, such as mortgage or student loans, will be paid out in case of the policyholders' untimely death during the policy period. If dependents are relying on your income, they will receive the benefits.
If you own a large estate, the term insurance payout can be used to settle the taxes.
A policy should always review its specifics before buying it to ensure it fits your needs and financial objectives. When planning insurance, it's important to consider your long-term needs in light of your current financial situation. One can choose between universal, whole, and term life insurance depending on one's requirements.
| Term Life Insurance | Universal Insurance | Whole Life Insurance |
|---|---|---|
| Death benefits while the policy is in force | Death benefits are not guaranteed | Guaranteed death benefits |
| No cash value accumulation | The cash value can build over but depends on the policy. | Guaranteed cash value |
| Customizable | Flexibility in premium rates | Flexibility in dividends |
| Lower premiums | Lower premiums | Expensive premiums |
| Will lapse if you outlive the term length | May lapse | Doesn't lapse |
| Not an investment option | An investment option in some variants. | Works as an investment option |
| Covers a set period | Long-term option | Lifetime protection |
Before you finalize the provider, you must research the coverage types and the term you need the coverage for based on your current financial status. Therefore, you need to follow these steps if you are looking to purchase term life insurance.
Based on the money your family would need, including the mortgages, outstanding loans, and other future expenses.
It will be best to look at it as it coincides with events like retirements or your children's higher education.
Compare policies and prices; you can also use online quotes and an insurance calculator that will give you an idea about how much you will have to pay as a premium.
Along with what aligns with your budget and needs, looking for companies with high financial ratings and good customer service is good.
The terms and conditions of any policy need to be read carefully. This will allow you to review the nature of the policy and make a note of the payment terms.
For the coverage to stay in force, the payments must be regular; otherwise, it can lead to the policy lapse, and you can lose your coverage.
Understanding your term insurance plan will be easier if you know the following terms and the hacks for trusting your choice.
It is the percentage of claims that an insurance company settles against the total number of claims received in a given financial year. Therefore, this factor helps determine the insurance company's financial stability and whether it has a good track record of settling claims.
The assets and liability ratio of the insurance company will also send in an assurance that the insurance company can cover its commitments. It is considered good if the company has a solvency ratio above 20%.
Riders are add-ons that will excite you with their benefits, but make sure they are absolutely required. It can be an added liability if they are not specific to your needs. However, you can consider add-ons like accidental death rider, critical illness, and income benefit rider based on your needs.
If you are looking at a lump sum payment in the event of a critical illness diagnosis, then make sure the insurance company has the option of critical illness coverage. However, the premium can be higher than taking up the basic cover.
The life insurance rates published in this guide are based on the results of research completed by Way.com’s data team. Using a mix of public and internal data, we analyzed millions of rate averages across U.S. ZIP codes.
Quotes are typically based on a full coverage policy average unless otherwise noted within the content.
These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes will differ. Given this, it’s important to go through our insurance steps form to find how much you can save with way.com
One can decide on the tenure of their term plan by looking at the current financial commitments and how one wishes it to pan after a few years or after your retirement. Thus, the tenure can be decided based on what you need and how much you can afford.
Even though it can vary with each provider, death by suicide and criminal acts are generally not covered under insurance. Similarly, if not disclosed, a pre-existing medical condition can lead to the rejection of claims.
In the case of term insurance, the policyholder will lose the death benefits if the death happens after the policy period ends.
The insurance premium rate for a non-smoker will always be less than that of a smoker. This is because smoking can make you prone to diseases. This increases the chance of a payout for the company.
Several things, most of which have to do with your age and health, affect your level term rate. There are also other things, such as your specific term policy, insurance provider, and benefit amount.
Accidental insurance can also cover your financial needs due to accidental disabilities. While term insurance will provide coverage only for a specific period and death benefits only if the death happens during the active policy term.
Whole life insurance provides death benefits, cash value, and maturity benefits. However, term life insurance cannot be considered an investment option due to the lack of a cash value component.
No, term plans do not offer any maturity benefits
A return of premium (ROP) life insurance rider is an add-on that you can choose to add to a term life insurance policy. If you live longer than the policy term, you get back all or some of the money you paid for the policy.
Access your digital insurance card through the app. You no longer need to carry your physical insurance card with you.
Receive reminders before your renewal. Way.com will also send new quotes from up to 45 insurance companies with your renewal reminder.
Keep everyone on your policy up to date by sharing your insurance information.
Make changes to your policy right from the app (coming soon) and ask for expert advice.
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