Options for customizing your term life insurance policy
- Length of term: Determines the amount of time you are covered by insurance. Typical options are 5, 10, 15, 20, and 25 year terms. Premiums will be locked in for the length of the term, meaning the cost of insurance will stay constant.
- Renew or Convert: Still need coverage when the term is up? Term life insurance policies are renewable up to certain age limits. You can even convert the policy to a permanent one, if your need for insurance is on‐going.
- Term 100: A permanent Term Life insurance policy where premiums remain level and are paid for life (or until age 100). At age 100 the policy matures and a death benefit is paid.
- Joint policies: Sometimes it is more cost effective to cover two people on a single policy rather than take out two separate policies. There are then three possibilities for when the policy will pay out:
- Joint first-to-die: Insurance company pays out benefits as soon as one of the policy holders passes away. This can be a good way to ensure that a surviving spouse will have enough money to survive alone.
- Joint last-to-die: Insurance company pays out after both policy holders have passed away. This can be a good way to pay for funeral costs, or to pass money to the next generation.
Term life insurance as an add-on rider to another policy
A term life insurance policy can be added as a rider to almost any form of permanent life insurance (Whole Life, Universal Life). Riders allow term life insurance to provide some supplemental insurance for a specified period of time.
An example might help illustrate the use of riders. Tim and Jen are married with 2 young children and have just purchased their first house. They have decided to protect their mortgage by purchasing a $250,000,
20 year Term Life insurance policy. Upon further consideration, they would also like to have an amount of insurance for their children to ensure they receive a good education in case something
were to happen. With the help of their advisor, they purchase a joint first‐to‐die $50,000 Whole Life policy, with a $250,000, 20 year Term Life insurance rider. This means, for the next 20 years,
they will have a total of $300,000 of life insurance. After the term rider expires, their premiums will decrease to reflect the remaining $50,000 Whole Life policy they would still own.