What Is Direct Term Life Insurance? Everything You Should Know
What is term life insurance?
Term life insurance is a type of death benefit that pays the policyholder’s heirs throughout a specified period.
Once the specified period and policy expires, the policyholder can either renew their policy, or convert the policy to permanent coverage.
Term life insurance is distinct from life insurance. Life insurance offers different coverage, and it can be a lifetime policy. In contrast, term insurance tends to be shorter-term and is also the most affordable type of insurance.
As mentioned above, term life insurance is also known by other names. You may see one of its variations: pure life insurance, direct life insurance, direct-to-consumer life insurance, term insurance online, or even online consumer insurance.
What is direct term life insurance?
The relatively new term in the personal finance and financial wellness world is known as “direct” term life insurance.
The word “direct” reflects the pace of the modern world and our access to the internet. But as mentioned above, there are some variations that you should be aware of.
What’s the difference between the well-known standard: term life insurance?
The answer comes down to the process. Also known as “direct-to-consumer,” meaning you purchase straight from an insurance company or agency. Conveniently, it’s easy to get covered as you can buy direct term life insurance online or by phone.
With the technological advances in recent decades, many consumers now prefer to do their shopping online, and as a result, many businesses had to adapt to suit these growing demands.
Types of Direct Term Life Insurance
Depending on your circumstances and needs, you will find different types of insurance which may suit your needs better.
These are as follows:
1.The Level Term or Level-Premium Policy
This type of policy provides coverage between ten to thirty years, with a fixed death benefit, and both of the premiums are fixed.
This option is comparatively higher than other policies, such as annual policies, as it must account for increasing costs year on year throughout the policy duration.
2.The Yearly Renewable Term (YRT) Policy
Yearly renewable term (YRT) policies can be renewed annually without reapplying and have no specified term.
With this option, the cost will increase as the policyholder ages, so this is a defining factor when considering cost and duration.
3.The Decreasing Term Policy
Decreasing term life insurance pays out less over time and a death benefit that declines yearly, with a fixed level premium.
Decreasing term policies are often used to cover the balance of a repayment mortgage as its total decreases over time and will be paid in full at the end of the term.
How do direct term life insurance policies work?
You may choose direct term life insurance if you’re looking for a quick turnaround and affordable coverage. As covered, term life is one of the most affordable and foundational types of coverage available, making it the clearest choice for many families.
It’s quite straightforward. Direct term usually covers you for a specific time; the average is 10 to 30 years. In terms of conditions, your family will receive a cash payout if you die before the term ends, based on your coverage amount.
What is the benefit of direct term life insurance?
We will summarize some of the advantages of direct term life insurance below.
For the typical family, direct term is attractive as it’s often a hassle-free way to gain financial security, and it’s cost-effective and suits growing families too.
For older spouses, however, the cost isn’t as low in comparison to young families due to the higher costs of premiums to older policyholders.
Applying for a direct term is convenient, and it’s an easy step-by-step process with a trustworthy insurer.
Also, the coverage is personalized based on the information you provide. Therefore the death benefit and monthly premiums will be catered to your and your beneficiary’s needs.
Direct term life insurance also benefits from lower premiums since the policy will be valid for a limited period. This factor makes it an attractive option for people looking for coverage for specific periods of their lives or specific reasons such as debt or funeral expenses.
Lastly, there is also less commitment involved. Term life insurance contrasts with permanent policies by covering what’s required according to the customer’s needs.
What happens at the end of the term for direct term life insurance?
In normal circumstances and with most policies, when the insurance expires, the policy expires. The insurance carrier will usually inform the policyholder that the policy is no longer in effect.
Term policies don’t have cash value, so when your coverage expires, your life insurance protection also expires.
The length of the insurance policy does not affect these terms, as per the terms and conditions of the policy, there’s no residual value. Therefore, you must apply for new life insurance if you need more coverage.
Can you cash out direct term life insurance?
In a word, no, you can’t cash out direct term life insurance. These policies don't accumulate cash value during the coverage period, such as ten to thirty years. However, it’s worth noting that some term policies have an option that enables you to switch to permanent life insurance.
As mentioned above, if you die before the term has expired, your family or your beneficiary will receive a payout.
Even with whole life insurance, it’s not advisable to cash out but if you do, we recommend waiting at least 10 to 15 years for your cash value to grow. Before cashing in a whole life insurance policy, it’s wise to speak to an advisor who will be able to assist you.
Cost of direct term life insurance
Your personal information will be used to answer this question, and there isn’t one straightforward answer to how much direct term life insurance will cost you.
What’s certain is that when you buy a direct term life insurance policy or receive quotes, the premium is determined on the policy value.
Here are some of the factors which are taken into consideration when it comes to pricing:
- Your personal details, age, gender
- Health history, medical conditions (i.e., pre-existing conditions, operations in the past, whether you take any medication at the moment).
- Hobbies and occupation etc.
How Much Term Life Insurance Do You Need?
That’s entirely up to you. When deciding how much term life insurance you need, it’s advisable to account for exactly what you need the insurance for.
To determine what's best for you, consider how long you will require the coverage, your actual budget for premiums, and whether you will need the cash from the policy during your lifetime, as per our advice above.
To calculate the amount of life insurance you need, you can also choose to multiply your annual income by the number of years you have left until retirement. For this, you can speak to an advisor who would be happy to help you or answer any of your questions.
While term life insurance provides coverage for a set period, whole life insurance lasts your entire lifetime, and we have covered the differences below.
What is the difference between whole life and term life insurance?
Before you make your decision and while you compare multiple policies, we advise that you decide between term life and whole life insurance.
By comparing the two options, you’ll see which one best fits your needs and be confident that you’ve made the right choice.
Alongside our advice mentioned throughout this article, we have narrowed down the main things to consider when comparing the two types of insurance.
There are significant differences between term vs. whole life insurance, and that is down to the length of the policy and the cash value benefit.
We have covered term life above. Now let’s take a look at whole life insurance.
Whole life insurance covers your whole life period from the time it's purchased as it's a permanent policy contract.
Whole life insurance is a traditional type of insurance that features a fixed premium rate which pays a fixed death benefit.
Direct term life insurance quotes
How to apply for a quote
Applying for and purchasing term life insurance is usually straightforward if you apply for quotes with a trusted insurer.
In a few steps, you can use an insurance company’s online quoting system, such as ours, and get an initial quote. Or, you may choose to speak to our advisors in person.
WHY CHOOSE LIFE INSURANCE WITH PITSAS
- Considerable financial income for family members.
- Coverage of expenses for your children’s education.
- Immediate mortgage payment cover.
- Tax benefits and deductions.
- Connect the policy with your medical insurance and save up to 25%.
After receiving your quotes, you can gauge the varying levels of coverage based on your needs and budget, and if you decide to proceed, you will go into the application process.
The whole process is straightforward and speedy, and after you receive your quotes, it’s up to you whether or not to proceed. We are here to guide you in this process, and please do contact us with any questions you have.