Ordinary Life Insurance: What You Need to Know

Ordinary life insurance is a type of life insurance policy that provides coverage for a specific period of time, typically 10, 20, or 30 years. It is also known as term life insurance, as it provides coverage for a specific term or period. Ordinary life insurance is a popular choice for individuals who want affordable life insurance coverage for a specific period of time.

How Does Ordinary Life Insurance Work?

When you purchase an ordinary life insurance policy, you pay a premium to the insurance company. In exchange, the insurance company provides coverage for a specific period of time. If you die during the term of the policy, the insurance company pays a death benefit to your beneficiaries.

For example, if you purchase a 20-year ordinary life insurance policy with a death benefit of $500,000, and you die within that 20-year period, your beneficiaries will receive a death benefit of $500,000.

If you do not die during the term of the policy, the coverage expires and your beneficiaries do not receive a death benefit. You can also choose to renew the policy at the end of the term, but the premiums may be higher due to your age and health status.

Who Should Consider Ordinary Life Insurance?

Ordinary life insurance is a good option for individuals who have dependents and want to ensure that they are financially protected in the event of their death. It is also a good option for individuals who have a specific financial obligation, such as a mortgage or college tuition, that they want to ensure is paid off in the event of their death.

Ordinary life insurance is also a good option for individuals who want affordable life insurance coverage for a specific period of time. It is generally less expensive than permanent life insurance policies, which provide coverage for the entire lifetime of the insured.

What Are the Advantages of Ordinary Life Insurance?

There are several advantages to purchasing an ordinary life insurance policy:

1. Affordable Premiums: Ordinary life insurance policies typically have lower premiums than permanent life insurance policies.
2. Flexible Coverage: You can choose the length of the policy term and the amount of the death benefit.
3. Financial Protection: Ordinary life insurance provides financial protection for your dependents and can help pay off specific financial obligations.

What Are the Disadvantages of Ordinary Life Insurance?

There are also some disadvantages to purchasing an ordinary life insurance policy:

1. No Cash Value: Ordinary life insurance policies do not accumulate cash value over time, unlike permanent life insurance policies.
2. No Lifetime Coverage: Ordinary life insurance policies only provide coverage for a specific period of time, and the coverage expires at the end of the term.
3. No Investment Benefits: Ordinary life insurance policies do not provide any investment benefits, unlike some types of permanent life insurance policies.

How Much Does Ordinary Life Insurance Cost?

The cost of an ordinary life insurance policy depends on several factors, including your age, health status, and the length of the policy term. Generally, the younger you are when you purchase the policy and the healthier you are, the lower your premiums will be.

You can use a life insurance calculator to estimate how much an ordinary life insurance policy will cost based on your age, gender, health status, and the amount of the death benefit you want.

FAQs

Q: What is the difference between ordinary life insurance and permanent life insurance?

A: Ordinary life insurance provides coverage for a specific period of time, typically 10, 20, or 30 years, while permanent life insurance provides coverage for the entire lifetime of the insured. Ordinary life insurance policies are generally less expensive than permanent life insurance policies.

Q: Can I renew my ordinary life insurance policy at the end of the term?

A: Yes, you can choose to renew your ordinary life insurance policy at the end of the term, but the premiums may be higher due to your age and health status.

Q: Can I convert my ordinary life insurance policy to a permanent life insurance policy?

A: Some insurance companies offer the option to convert your ordinary life insurance policy to a permanent life insurance policy. However, there may be limitations on when and how you can convert the policy, so be sure to check with your insurance company.

Q: What happens if I stop paying the premiums on my ordinary life insurance policy?

A: If you stop paying the premiums on your ordinary life insurance policy, the coverage will lapse and your beneficiaries will not receive a death benefit if you die. However, some insurance companies offer a grace period during which you can still make payments and keep the policy in force.

Q: How do I choose the length of the policy term and the amount of the death benefit?

A: When choosing the length of the policy term and the amount of the death benefit, consider your financial obligations, such as a mortgage or college tuition, and the needs of your dependents. You may want to consult with a financial advisor to help determine the appropriate coverage for your situation.