Term Life Insurance

What is term life insurance? The easy answer is that it's life insurance for a fixed period or term of years. So it's always for you to decide how long you think you're going to need life insurance. It's probably best to think about fifteen to twenty years. That means, if you're looking to start a family, your children should be approaching an age when they can be financially independent in twenty years. If you already have a family, a shorter period may be in order.

Let's add a little detail to this. All insurance policies are simple contracts between you and the insurance company. You pay the premium installments when they fall due and, in return, the insurer pays out if the circumstances defined in the policy arise. So your vehicle is damaged in a collision, your home is struck by lightning your fall ill, or the life insured ends. The policy you buy can be for a fixed term or open-ended, i.e. valid for as long as you keep paying the installments. How are the premium rates calculated? These depend on actuarial tables. Over the decades, insurers have been collecting factual information about our lives. They know how many traffic accidents there are every day for the last century. They have been gathering information about our health and lifespan ever since they decided to sell these insurance policies to the mass market. This information is used to predict the future.

As you can imagine, the statistical predictions do not stay the same. Over the last thirty years, the standard of medical care has been improving. We now live longer more healthy lives. Let's add in another fact. The nature of the work we do has been changing quite rapidly. Fifty years ago, a large percentage of the population had dangerous jobs in the mines, construction and heavy industry. More people were injured and lives shortened. Today, more people work in offices and relatively safe environments. So if you had asked an actuary how long people would live, the answer fifty years ago would have been significantly shorter than today. That's reflected in the premium rates. Fifty years ago, the risk of death within twenty years was quite high so the annual premium was high. Now people are expected to live longer, life insurance quotes are a faction the quotes of yesterday. Add in the greater number of companies offering term life insurance and the competition is encouraging annual premium rates to fall even faster. Term life insurance has never been this cheap before.