Premium Term Life Insurance and Joint Term Life Insurance
Term life insurance is almost invariably your best option when it comes to purchasing life insurance. It is generally the least expensive option, and it is certainly the least complicated option when it comes to navigating the arcane world of life insurance. There are a few variations of traditional term insurance that, while slightly more complicated than vanilla term life, might make sense to you based on your personal situation.
First let’s give a background on term insurance. Term insurance is a policy that insures against your death. It is basically a bet you’re making with the insurance company against your own death. While this may sound morbid, it’s one of the most prudent financial decisions you’ll ever make. For a few hundred dollars a year you can often insure yourself, and ultimately your family, for over $500,000 if you’re relatively young and healthy when you purchase the policy. You buy a policy for a set term, or number of years, often 10, 20 or 30. You buy a policy with a certain death benefit, often in increments of $100,000. And then each year you pay the same amount of money, known as the premium, to keep the policy active. If you have an active policy and you die within the term, then your family gets the face value of the policy paid out to them. If you don’t die during the term, the policy expires.
Two variations are joint term life insurance and return of premium term life insurance. Joint term life insurance is a policy where two people, often a married couple, are on the same policy. The policy pays out only on the first person to die. So if you have a $600,000 and one of you die, the other is paid the money and then the insurance policy has ended. This policy is often much cheaper than even a traditional term insurance policy. Return of premium term insurance is a policy that is nearly identical to a traditional term policy except at the end of the term if you haven’t died, you are paid back a sum equal to every dollar you paid in premiums over the term of the policy. This policy is more expensive than regular term life, but to many people it feels like a no-brainer in that they are either paid out the death benefit or they get all their money back at the end of the term. Both these options are well worth looking into, and you should ask your insurance broker about them.
