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How does it work?

It s easy. You re covered for the length of your policy s term. You know exactly what your monthly payments will be, when they re due, and how much your family will receive if you pass away during the term. That amount will never change it s called a fixed death benefit.

Your payments might be  monthly, quarterly, semi-annually, or yearly, depending on the company you choose. You can cancel your policy at any time, but if you do, the insurer doesn t have to pay anything if you pass away.

If you keep your policy current and pass away during your term, your family receives the face value of your policy 100% income tax-free. What can they use that money for? Anything they need. Some families use the death benefit to cover the cost of a funeral and burial expenses for their loved one. Many other families buy larger policies in order to:

• *pay for child care
• *fund higher education
• *cover debts or liabilities, like a mortgage
• *fund a buy-sell agreement for their business
• *replace an income stream

There s no limit or restriction on what your family can use the money for. That s why we think of the death benefit as a love letter from beyond the grave. It s one way you can make sure your family is financially protected if anything happens to you.

How long a term should I get?

As its name suggests, your policy covers you for a particular amount of time, called the term. This could be 5, 10, 15, 20, or even 30 years. Because it has a limited term, it s less expensive that policies that cover you for the rest of your life (called permanent life insurance).

When you buy term life insurance, it s best to balance between safety and cost. With that in mind, we think it s much safer to buy a policy with a long term rather than to buy a series of short-term policies. Here s why:

When you buy a longer term, your rates are locked in under the health class you had when the policy first went in force. This health class is one of the determining factors in the cost of your policy. If you lock in that rate, you can t be charged more during the term of your policy.

Here s an example:

Say your insurer gave you a Preferred health class when you bought your policy, which kept your rate low. Then, let s say you were diagnosed with cancer in the first year of a 30-year policy. Because your term is so long, you ll keep paying those low Preferred rates for the next 29 years.

On the other hand, if this scenario happened during year one of a 5-year policy, you might not even be able to get a new policy after that five-year term ends. If you did, you d pay a much higher rate.

What happens at the end of my term?

When your term ends, so does your policy. The good news is that you have options for continuing that coverage.

The new rates will be specified in your contract—keep it handy! At this point, you have several options:

• Pay the higher rates spelled out in your contract to continue coverage. This might be a good solution if the insured person is ill and might not be able to get affordable coverage anyway. Continuing your policy like this is usually only allowed until the insured person reaches a certain age (in many cases, that s age 90).
• Convert to a permanent policy.  Your insurer can replace your term life policy with a permanent policy that covers you for the rest of your life. Your rates might only be guaranteed for a certain period (such as 10 years). There might also be a specific window for conversion, such as the first 5 years of your term policy.
• Opt for a renewable policy.  Renewable life insurance can be replaced with a policy of the same type, face amount, and health class. You might have an increase in payment amount to reflect your age.

What kinds of term policies are there?

• Annual renewable (ART). The term is just one year long, but you can renew your policy upon its expiration. Your rate will probably increase each year you take this option.
• Adjustable.  Lets you change the size of the death benefit while coverage is in force.
• Universal term.  Term life insurance with a cash value account, like the ones attached to universal life insurance policies.

How do I shop for a policy?