(800) 253-1482Term Life Insurance in Texas
Summary: Term life insurance pays a death benefit if the insured passes away within a predetermined timeframe. There are various policies, riders, and clauses available to meet your needs best. Unlike whole-life policies, term life insurance plans do not generate cash value. Comparing your needs and coverage options is the best way to find the right plan for handling your expenses. Estimated Read Time: 8 mins
Mortgages, higher education, lifestyle expenses, and final expenses are major considerations for millions of families. Term life insurance helps provide peace of mind and financial compensation during difficult times.
However, there are several considerations, types of policies, and more to consider. Below, we’re looking at how to find a term life insurance quote online, how plans provide compensation, and your options for protection.
What Is Term Life Insurance?
Term life insurance provides coverage but only for a set period agreed upon between the policyholder and carrier. For example, many policies offer coverage for 10, 20, or 30 years.
If the person insured passes away within the term of the policy, a death benefit is paid to the beneficiaries listed in the plan.
The death benefit can be paid in either a lump sum or annuities. Level-term policies maintain a consistent death benefit while decreasing-term policies decrease over time.
Some term policies allow conversion to permanent life insurance like whole or universal life without a medical exam post-term, but converting your policy usually means paying a higher premium to do so.
You can renew your policy if agreed upon, and your options may extend coverage without additional underwriting.
Furthermore, utilizing a return of premium (ROP) life insurance policy allows for either a partial or complete refund of premiums if there is no death benefit paid out by the end of the term.
Though employers do provide group term life insurance at times, you can also purchase individual coverage that may better meet your personal needs.
How Does Term Life Insurance Work?
Term life insurance offers straightforward protection: Pay premiums for a specified period, typically 10 to 30 years, and if you die during that time, your beneficiary receives a cash benefit.
Unlike permanent life insurance, term policies lack cash value and expire without payout after the term.
Term life insurance rates take some of the guesswork out of things as most term policies maintain a fixed premium throughout the term for simplicity.
During the application process, insurers assess risk factors like health, occupation, and hobbies.
Certain risky activities or professions may increase premiums, for example, if you are an avid skydiver or work on an oil rig.
You’ll need to choose a term length based on your family's needs, with longer terms often providing more security but costing higher premiums.
Once you’ve selected an appropriate term, you’ll need to pick the right death benefit amount to support your family in your absence.
Beneficiaries can include family members, trusts, charities, or friends to receive the tax-free death benefit payout upon the insured's death as stated by the contract.
Types of Term Life Insurance
Everyone wants to find the best term life insurance policy but with so many variables, coverage will differ from policyholder to policyholder.
Fortunately, there are many options for term life policies available. Each plan comes with its own form of protection, premiums, etc. Here’s what you need to know:
- Convertible Term Life Insurance - If you wish to switch from a term life insurance policy to a permanent policy, you can with a convertible term life insurance plan. Typically, these coverages have a 10 to 20-year window allowing conversion. Expect your premiums to rise as you age but you don’t have to take on medical exams. The older you are when you convert your policy, the higher your premium will be.
- Decreasing Term Life Insurance - You can typically receive this coverage cheaper than other options because the death benefit decreases over time. If you wish to cover your potential debts that typically diminish over time when you die, like mortgages or student loans, this may be the right coverage for your needs.
- Level Term Life Insurance - Level term life insurance maintains a consistent death benefit throughout the policy's duration. Regardless of when you pass away during the policy term, your beneficiaries receive the same payout. It may also be referred to as level benefit term life insurance, emphasizing the fixed nature of the death benefit.
- Mortgage Life Insurance - The biggest debt most Americans have is their mortgage. You can purchase life insurance policies that will pay off the mortgage in the event of your death making the bank or lending institution you are using the beneficiary. This is a great tool for families looking to avoid hefty mortgages after the untimely death of a loved one.
- Renewable Term Life Insurance - Typically a clause within policies, they allow you the ability to extend coverage without re-qualification for a fixed period. Continuity depends on current premium payments and a renewal premium. It's beneficial due to unpredictable future health circumstances, as you don’t have to take a medical exam, despite likely higher initial premiums.
- Return of Premium Life Insurance - If you want to receive the premium you’ve paid for your term life insurance policy back at the end of the term in the event you outlive it, you’ll need to add an ROP rider. Otherwise, it’s unlikely that your plan will return your premium and you also won’t receive a death benefit.
Term vs Whole Life Insurance
Comparing term life insurance vs whole life is one of the most important steps in finding coverage.
Both are powerful financial tools for your final expenses and more but they operate differently.
Because everyone has different needs, financial situations, and risk tolerances, it’s important to research each type of policy.
However, because there are multiple options available, it helps policyholders identify the right coverage on a more personal level.
Here are a few considerations when comparing term vs permanent life insurance policies:
- Term life insurance isn’t going to last forever. Either you pass away during the term of your policy and a death benefit is paid or your coverage effectively doesn’t provide anything other than peace of mind.
- If you don’t have ROP coverage or a rider, you won’t receive your money back for term life either.
- Permanent life insurance policies cover you for life. A whole-life policy is going to provide a death benefit sooner or, hopefully, later.
Keep in mind when considering the difference between term and whole life insurance that you can get the best of both worlds.
Convertible term life insurance is available, so you can start with term life and end up with a whole life plan if you decide to change your coverage later.
Can You Borrow Against Term Life Insurance?
Term life insurance policies don’t allow you to borrow from them. If you’d like to take out life insurance loans, you’ll need permanent life insurance policies that build cash value.
Because a term life policy doesn’t build cash value, you can’t borrow against it. If you wish to borrow from your life insurance, it’s important to shop for whole-life policies or have a convertible term life plan.
Can I Sell My Term Life Insurance Policy?
You can sell term life insurance policies in Texas as they are considered personal property. Selling your policy works just like anything else, however, you’ll need to be aware of a few things before you make the sale:
- Life settlement companies buy policies, however, scams are prevalent in these transactions. If a life settlement company is legitimate, it will have a license with the Texas Department of Insurance (TDI).
- If you wish to look up the company’s license, you can do so by calling 800-252-3439.
- Life settlement companies target high-value policies from older individuals, typically requiring a policy worth at least $100,000 and sellers aged 65 or older.
- They offer higher payouts for policies held by individuals with health conditions affecting life expectancy.
- Once sold, the company assumes policy ownership and premium payments, but your family forfeits the life insurance benefits.
- Before selling, compare offers from different companies to ensure you’re getting the best deal available.
- Keep in mind there are potential tax liabilities, ineligibility for Medicaid and other public assistance, and non-exemption from creditors regarding the sale proceeds.
Overall, selling a term life insurance policy is not something to take lightly. Be sure to speak with your life insurance agent and financial advisor before making any decisions and always conduct due diligence.
What Happens When Term Life Insurance Expires?
When term life insurance expires, you typically won't get your premiums back. However, adding an ROP rider can refund some or all of your premiums if you outlive the policy.
Alternatively, policies with a guaranteed renewability clause allow you to extend coverage and the death benefit on a year-to-year basis or convert to whole life insurance if your policy offers a conversion provision or term conversion rider.
If you no longer need your term life policy, you can let it lapse without action. Yet, before expiration, review your options.
You can renew your policy annually, maintaining the same death benefit but with increasing premiums each year.
This option usually suits short-term needs, such as terminal illness, ensuring beneficiaries receive a death benefit.
For longer coverage needs, consider converting to permanent whole life insurance, providing lifetime coverage without a new medical exam.
Alternatively, purchasing a new policy may be necessary if conversion isn't an option.
However, keep in mind that applying for a new term life policy involves a fresh application and medical exam, except for simplified issue term life insurance.
Buying a new policy ahead of expiration can prevent higher term life insurance policy rates, particularly for those with changing health or financial circumstances.
Texas Term Life Insurance Quotes Online
Factors such as your age, the amount of coverage you need, the type of policy you choose, and more can affect your premium.
Comparing carriers is important to find the right coverage for your needs as well as finding the lowest price available.
Here at Freedom Insurance Group, we’re proud to help families prepare for the worst while hoping for the best. Shop and compare free term life insurance quotes online from top-rated carriers. There is no obligation.
