Term insurance

MR. WATSON: Keep in mind that this chapter is dealing with individual policies.

MR. WATSON: Term life is the simplest type of life insurance. It provides the dollar amount of benefit you bought  for a specific period of time, and pays the death benefit only if you drop dead during that period of time. It has no cash value. It's like renting. If you rent something, do you get anything back at the end of that time?

STUDENTS: No.

MR. WATSON: Term insurance is like temporary insurance. Know these three characteristics.

• Level term ( Level premiums - Level death benefit) - For long Term obligations, raising a family, or shorter term obligations; Your choice.
• Decreasing term (Level premiums - Decreasing Death Benefit) - For mortgages or decreasing debt
• Increasing term (Increasing premiums - Increasing death benefit) - To keep up with inflation

MR. WATSON: The simplest form of life insurance there is. Like taking a taxi-cab from here to Brandon. When I get to Brandon, do I get anything back? No. Do I expect anything back?

STUDENTS: No.

MR. WATSON: One-year term, how long does it last?

ALL: One year.

MAN: Forever.

MR. WATSON: Lebanon didn't say "forever," did he? Dang it, man. One-year terms lasts one year. We call it ART - annual renewable term. Five-year term, how long does that last?

STUDENTS: Five years.

MAN: Five.

MR. WATSON: That's my boy. Ten-year term.

STUDENTS: Ten years.

MR. WATSON: 20-year term.

STUDENTS: 20 years.

MR. WATSON: You can buy a term policy that lasts until age 55 or 65 or 85 etc. You understand? So policies can be issued, and the time you’re covered, could be defined in terms of years or defined in terms of age.

MR. WATSON: There is level term. Does the amount of insurance go up? No. You choose the time frame that you’re covered, your premium is the same during that time. If you die during that time, the company pays the benefit. If you die after that time, the company pays nothing.  Like renting an apartment.

MR. WATSON: What about decreasing term? What happens with decreasing term? The amount of insurance goes down. Listen up, guys. The premiums always stay the same. The premiums stay level for the term of the contract. We will show you this little deal here.

MR. WATSON: We have a guy, age 30, who wants coverage to age 60. It is a 30-year decreasing term policy. You agree?

STUDENTS: Yes.