Term Life Insurance Policy

Thanks for checking out our site life-term-insurance policy.com where we aim to provide a free guide to buying life insurance. This is the basic guide that you should see before you go ahead and commit to a life insurance purchase as it explains it a lot more thoroughly and more importantly jargon free than most insurance company’s websites. There are several other types of life insurance however this is the cheapest, straight forward and popular amongst consumers.

Note - 'Life Term Insurance', 'Term Life Insurance' and 'term insurance' all mean the same thing, so for simplicity we'll use 'term insurance policy'

We are going to tell you what a life term insurance policy is, the types of life term insurance policy that there are, what the benefits are, as well as the process that will take place once you apply, which can be a rather long drawn out process that insurers would rather your believe is not the case. We cover from the moment you submit your application to the moment that the insurer provides you with a policy, we go into as much detail as to let you know the type of life insurance questions that the insurer will be asking you, there is no way to get a better head start on the application process and make sure that you are not caught out which could lead to your application being delayed.

This is in essence a complete guide to term life insurance.

Term life insurance definition - Short term life insurance

The definition of a term life insurance policy is a short term life insurance policy providing affordable financial protection against the unfortunate and unexpected event of your death. It is possible to take out a term life insurance policy with additional features or riders such as Critical Illness cover but here we are covering the stand alone life cover.

The objective of a term life insurance policy is to pay out a guaranteed lump sum following the death of the life assured, or one of the lives assured if the policy is taken out in joint names. This lump sum is pre-determined at the start of the policy and is guaranteed throughout the also pre-determined length of the policy. It is called short term life insurance because it is taken out over a short period such as 5,10,15 or 20 years as opposed to long term life insurance policy such as universal life insurance.

There can only ever be one claim on a policy, once the death benefit has been paid the policy has finished. The sum assured or death benefit as it is also called, acts as financial security for your family or loved ones, those that are financially dependent upon you or to pay off an outstanding debt or mortgage. The basic policy will pay out on death only inside the term however some insurers will also pay out should you be diagnosed with a terminal illness whilst this short term life insurance is in force.

The common misconception is that buying Life Insurance is expensive. This is completely untrue and a Term Assurance Policy is one of the cheapest products on the market. For more information please see our 'Term Life Insurance Premiums' page. We have provided some in depth case studies as examples as we believe this will make the entire process much more understandable.

The proposers, who will be the policy holders/owners, choose a fixed sum insured and a fixed term or period that the policy will be taken out over, for example $50,000 over a 20 year term, the policy commences July 1 2010 and expires July 31 2030. The length of the term available is usually between 5 and 30 years.

Customers will complete an application with the insurance company on-line, over the telephone or if going through a broker in person. By applying for life insurance you are entering into a contract with the insurer so in order for the insurer to find out exactly how insurable you are they will ask you a series of questions which must be answered in complete honesty or to the best of your knowledge.

The basic cost of the insurance is based upon mortality tables which provide costs in relation to an applicant's age, sex and whether they use tobacco products or not. This forms the basic Life Insurance Premium. This should match the premium that you would have been quoted if you chose to get a quote before applying as it does not include any potential inscrease following the underwriting process.

There are also medical and lifestyle questions that will need to be answered and these will decide whether your policy will need to be underwritten, please see our 'Life Insurance Underwriting Guide' and for a comprehensive guide to what questions you will be asked when making an application for a term life insurance policy please see our 'Life Insurance Questions' site.

All of the questions on the proposal form are asked on the lives assured, it is possible that the policy holders/owners and lives assured can be different.

Now that you understand the term life insurance definition here are some examples to put the theory into practice:

Mr and Mrs Torres take out a joint policy on their own lives, they are the joint policy holders/owners and the joint lives assured. They will answer all of the application questions on themselves and a claim can be made on the policy by the survivor when the first one of them dies during the term (It is possible to chose for the policy to pay out on the second death of the lives insured, check when applying). The proceeds are paid to the surviving policy holder/owner.

Mr Carragher takes out a single life policy on his own life, he is the sole policy holder/owner and the sole life assured. He will answer all of the application question on himself and a claim can be made upon his death during the term by those administrating his estate. The proceeds are paid to his estate unless he should put the policy in place to pay to a beneficiary(somebody financial dependent on him) or a debtor, for example mortgage company.

Mr Gerrard takes out a single life policy on the life of Mrs Gerrard, he is the sole policy holder/owner and Mrs Gerrard is the sole life assured. Mrs Gerrard will answer all of the application questions on herself and a claim can be made by Mr Gerrard upon her death during the term of the short term life insurance policy. The proceeds are paid to Mr Gerrard.

Who can take out a Term Life Insurance Policy?

Anybody resident in the jurisdiction of the insurer aged 16 or over, some insurers may have a maximum age limit, for example 85.

How much Term Life Insurance Cover do I need?

This is unique to each and every customer. It is important to know how much cover you require when buying Life Insurance. If you chose an unusually high sum then the insurer will ask for this to be justified. More on How much life insurance do I need?

We hope that this Life Insurance guide has been useful and informative and can go someway to assisiting you in going ahead and buying Life Insurance in the form of a Life Term Insurance Policy.