What Is Select Term 20 Life Insurance?

Life insurance offers a financial safety net, protecting loved ones. Term life insurance provides coverage for a specific period. Select Term 20 Life Insurance is a distinct type of term coverage, tailored for individuals meeting particular criteria, offering predictability and affordability. This article explains its components, characteristics, and the process of acquiring and managing such a policy.

Defining Select Term 20 Life Insurance

Select Term 20 Life Insurance is a specific type of coverage characterized by its fixed duration, stable costs, and eligibility requirements. “Term” signifies that the insurance provides coverage for a predetermined period, unlike permanent life insurance which lasts for an entire lifetime. If the insured individual passes away within this specified term, a death benefit is paid to their designated beneficiaries. The policy is designed to cover financial obligations for a set number of years.

The “20” in Select Term 20 refers to the policy’s duration, typically 20 years. Throughout this 20-year period, both the premium payments and the death benefit amount remain level and guaranteed. This predictability allows policyholders to budget effectively, knowing their insurance costs will not fluctuate. Should the insured individual die at any point within these 20 years, their beneficiaries will receive the full, predetermined death benefit.

The “Select” designation is a crucial component, indicating the underwriting class assigned to the policyholder. This classification reflects that the policy is offered to individuals who meet stringent health and lifestyle criteria, often referred to as “Preferred Select” or “Preferred Plus.” Qualifying for a “select” rate typically results in more favorable, lower premium rates compared to standard rates. Insurers assess various factors, including an applicant’s overall physical health, height and weight ratio, personal and family medical history, and lifestyle habits like tobacco use or dangerous hobbies.

Core Characteristics and Advantages

Once a Select Term 20 policy is in force, it offers several inherent characteristics and advantages. A primary benefit is predictable premiums, fixed and guaranteed not to increase for the entire 20-year term. This stability ensures policyholders can manage their finances without unexpected increases. The death benefit amount is also fixed and guaranteed, ensuring a specific sum is paid to beneficiaries if the insured passes away within the policy term.

Term life insurance, especially policies with “select” rates, are chosen for their simplicity and affordability. They provide substantial coverage for a defined period at a cost-effective price, generally less expensive than permanent life insurance. Unlike permanent life insurance, term policies do not accumulate cash value. Their value lies solely in the death benefit, paid upon the insured’s death during the term.

Select Term 20 policies are useful for covering temporary financial obligations. Common scenarios include providing financial security for a family while children are dependents, ensuring a mortgage can be paid off, or replacing income during peak earning years.

Applying for and Managing the Policy

The application process for a Select Term 20 Life Insurance policy involves a thorough assessment to determine eligibility for “select” rates. Applicants complete an initial application and a detailed health questionnaire. A medical examination is usually required, including measurements, blood, and urine samples to check health indicators. This underwriting process allows the insurer to evaluate the applicant’s health and assign the appropriate risk classification.

If approved for the “select” underwriting class, the policy is issued with guaranteed level premiums and death benefit for the 20-year term. Keep beneficiary information updated, especially after major life events such as marriage, divorce, or the birth of a child, to ensure the death benefit is distributed according to current wishes. Timely premium payments are crucial to keep the policy in force and prevent it from lapsing.

When the 20-year term concludes, several options are available. The policy may expire, ceasing coverage and death benefit payment. Many policies offer renewal for another term, but premiums usually increase significantly due to the insured’s age and health changes. Another option is to convert the term policy into a permanent life insurance policy, such as whole life or universal life, often without a new medical examination. This conversion option typically has an expiration date.