Temporary (Term) Life

Term Life Insurance provides coverage for a set number of years—such as 10, 20, or 30—and can pay a pre-determined death benefit. Typically costs less than permanent coverage, but does not build cash value.

Term Insurance

Length of Coverage

Specific periods of time: 10, 20 or even 30 years of coverage

Premiums
Premiums may be level for a certain period of time only based on the individual’s life expectancy and the length of coverage. After the initial period, premiums will gradually increase

Premiums may also be graduated to increase as the cost of insurance rates increase

Premiums will be required at regular intervals during the entire time the life insurance policy is active to keep it in force

Cash Value

No cash value component, no policy loans or policy withdrawals are                                                                available to a policy owner

Advantages

The advantage of term insurance is that it is (initially) inexpensive

Tax-free death benefit

Helps provide for a family’s loss of income, covers short-term debts and needs

Disadvantages

The disadvantage of term insurance is that it is often outlived and the premiums eventually become prohibitive since they increase with age.

 Loans and withdrawals reduce the policy’s cash value and death benefit and increase the chance that the policy may lapse. If the policy lapses, is surrendered or becomes a modified endowment contract, the loan balance at such time would generally be viewed as distributed and taxable under the general rules for distributions of policy cash values. Pre-age 59 ½  penalty tax provisions apply to contracts classified as modified endowment contracts (MEC’s). Withdrawals from MEC’s, prior to age 59 ½ may be subject to a 10% federal income tax penalty.