Low Cost Term Insurance

Term insurance is, by its nature, a somewhat complex area of the insurance industry. “Term insurance” can refer to any insured item, although typically it refers to a life insurance policy. As one of the least expensive forms of insurance, term insurance is extremely popular. Understanding some of the factors that drive and limit the costs of term insurance is vital to finding low cost term insurance policies.

First, it’s important to understand how term insurance works. A policy holder pays an insurance company a set premium throughout the length of a term. Usually, this is a monthly premium, and under standard policy types, it’s locked at a certain level for the entirety of the policy’s life. Special alternative types of term insurance may provide a decreasing or increasing premium, but standard “level” policies do not change.

If the insured item is damaged (or in the cases of life insurance, if the insured person dies) during the length of the term, the beneficiary or beneficiaries are paid the coverage amount of the policy. Otherwise, the insurance company keeps the entirety of the premiums paid into the policy, except in cases where special terms have been built into the term insurance contract, as is the case with a ROP (“return of premium”) policy. Term insurance policies are sometimes said to be poor investments because of this. However, they serve a definite purpose for anyone who needs insurance for a set period of time, or people who needs an insurance policy with good coverage, but don’t really need an investment aspect.

There are several ways to find low cost term insurance policies. By limiting the length of the term, a policy holder limits the risk that the insurer takes, and this necessarily leads to lower costs. Therefore, a five year term policy with be much less expensive than a thirty year term. However, low cost term insurance policies with extremely limited terms provide much less protection. If the low cost term insurance policy is a life insurance policy, it may cost far more to renew the agreement, so after the first term’s expiration, any renewals will cause a jump in monthly premiums.

Decreasing the amount of coverage in an agreement is another way to find low cost term insurance policies. As many policy holders buy too much coverage in the first place, this can sometimes be a good way to decrease overall costs. However, this also affects the overall value of the policy.

To find a low cost term insurance policy without opting for a shorter term or less coverage, policy holders can practice good comparison shopping techniques (gathering quotes and doing a bit of research before deciding on a policy). In the case of life insurance policies, a policy holder can also exercise and quit smoking to find lower premiums. By decreasing the risks posed to a potential insurance company and by using the marketplace to find great deals, consumers can find low cost term insurance policies in almost any circumstances.