Term Life Insurance Policy Facts

If you are looking for a low cost life insurance option, or you are not looking for a policy that will carry you indefinitely, consider taking out a term life insurance policy. Term life insurance is much cheaper than whole insurance, and it won't hang over your head until you're old. But knowing exactly what term insurance is, is a must. Term coverage is a little bit different from whole coverage, so having your facts straight before searching for rates and policies is necessary.

A term life insurance policy can last you anywhere from 1 to however many years it takes for you to reach the age of 75. Each insurance company does have different year terms, and some do allow you to extend -- but only up until the age of 75. For this reason, only 1 percent of term policy holders' families have a chance to cash out their benefits.

Additionally, term insurance coverage does not come in only one flavor. The two types offered the most are decreasing coverage and level coverage -- and knowing the difference between the two can mean a useful policy or a useless policy in your case.

A decreasing term policy starts off at a certain benefit amount (say, $5000) and decreases each year. So the first year you would have $5000, the next year you would have $4000 and so on. The amount it is decreased by each year depends on the benefit amount and the policy term. The plus side to this is that decreasing coverage is the cheapest policy you can get, even within types of term coverage.

A level term life insurance policy does not decrease in value and the premiums stay the same. This is what is normally expected of an insurance policy, but decreasing may work better for certain circumstances. Deciding which term life insurance policy you will commit to is important -- it could affect your loved ones later on.