What Is Term Life Insurance?

Term life insurance is “pure” insurance. It offers protection only for a specific period of time. If you die within the time period defined in the policy, the insurance company will pay your beneficiaries the face value of your policy.

Term insurance differs from the permanent forms of life insurance, such as whole life, universal life, and variable universal life, which generally offer lifetime protection as long as premiums are kept current. Also, unlike other types of life insurance, term insurance does not accumulate cash value. All the premiums paid are used to cover the cost of insurance protection, and you don’t receive a refund at the end of the policy period. The policy simply expires.

Term life insurance is often less expensive than permanent insurance, especially when you are younger. It may be appropriate if you want insurance only for a certain length of time, such as until your youngest child finishes college or you are able to afford a more permanent type of life insurance.

The main drawback associated with all types of term insurance is that premiums increase every time coverage is renewed. The reason is simple: As you grow older, your chances of dying increase. And as the likelihood of your death increases, the risk that the insurance company will have to pay a death benefit goes up. Unfortunately, term insurance can become too expensive right when you need it most — in your later years.

Several variations of term insurance do allow for level premiums throughout the duration of the contract. You may be able to obtain 5-, 10-, 20-, or even 30-year level term, or level term payable to age 65. An advantage of renewable term life insurance is that it is usually available without proof of insurability.

Life insurance can be used to achieve a variety of objectives. The cost and availability of the type of life insurance that is appropriate for you depend on factors such as age, health, and the type and amount of insurance you need. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance.Policies commonly have contract limitations, fees, and charges, which can include mortality and expense charges.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP, which it awards to individuals who successfully complete initial and ongoing certification requirements.

Gilbert J. Baker, Ann Baker Ronn, and Karin L. Tyson are Registered Representatives. Securities are offered solely through Ameritas Investment Corp (AIC). Member FINRA/SIPC. AIC and The AFP Group and AFP Investment Advisory, Inc. are not affiliated. Additional products and services may be available through The AFP Group or AFP Investment Advisory, Inc. that are not offered through AIC.

In this regard, this communication is strictly intended for individuals residing in the states of California, Colorado, Florida, Georgia, Louisiana, Maryland, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Texas, Virginia and Washington. No offers may be made or accepted from any residents outside the specific states referenced.

Gilbert J. Baker, Ann Baker Ronn, and Karin L.Tyson are also separately registered as investment advisers under AFP Investment Advisory,Inc. a registered investment adviser, offering advisory services in the state of Texas. As such, these services are strictly intended for individuals residing in Texas.

This is not an offer of securities in any jurisdiction, nor is it specifically directed to a resident of any jurisdiction. As with any security, request a prospectus from your registered representative. Read it carefully before you invest or send money. A Representative from The AFP Group will contact you to provide requested information. Representatives of AIC do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.

A broker-dealer BD , investment adviser IA , a BD agent, or IA Representative may only transact business in a state if first registered in that state, or is excluded or exempt from registration in that state as a broker-dealer, investment adviser, BD agent or IA Representative, as appropriate. Follow-up, individualized responses to persons in a state by such a firm or individual that involve either affecting or attempting to affect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without first complying with appropriate registration requirements, or an applicable exemption or exclusion.

For Information concerning the license status or disciplinary history of a broker-dealer, investment adviser, BD agent, or IA rep, a consumer should contact his or her state securities law administrator.