Get Life Insurance That Grows With You: Ally Term Life Breakdown

Term life insurance provides affordable Ally Term Life protection for a specific period of time, typically 10 to 30 years. It pays a tax-free death benefit to your beneficiaries if you pass away during the term.

Term life works by locking in a fixed premium for the length of the term. As long as you continue paying your premiums, the death benefit remains the same. At the end of the term, the policy ends unless you choose to renew it.

The key benefits of term life insurance include:

  • Low cost – Term life premiums are significantly less expensive than permanent life insurance policies with the same death benefit. This makes it easy to obtain a high amount of coverage.

  • Guaranteed premiums – Your premium is guaranteed to remain level for the entire term period. It will not increase due to any changes in your health or age during the term.

  • Simplicity – Term life is a simple, straightforward policy to understand. The death benefit pays out if you die during the term, and that’s it.

  • Flexible terms – You can select a term length that aligns with your specific needs, such as covering your working years, your mortgage term, or until your children are grown.

The main difference between term and whole life insurance is that term life provides temporary coverage while whole life provides permanent, lifelong coverage. Term life only pays if you die during the term, while whole life accumulates cash value that you can access while living. However, term life is significantly less expensive than whole life for equivalent death benefit amounts.

How Does Term Life Insurance Work?

Term life insurance provides death benefit coverage for a specific period of time, known as the “term.” This can be 10, 20, or 30 years, depending on the policy.

The key feature of term life insurance is that it only provides coverage for the term of the policy. Once the term ends, coverage expires unless the policy is renewed. This differs from permanent life insurance, which covers you for your entire life.

Term life premiums are much lower than permanent life insurance since the coverage period is limited. This makes it an affordable way to get substantial death benefit protection.

The death benefit from a term life insurance policy is only paid if the insured dies during the term. If you outlive the term, you do not receive a payout. The policy simply terminates unless renewed.

Term life insurance is ideal for covering needs you may have for a specific period of time. Common uses are providing income replacement and debt payment if you die while your children are still growing up or if you have a mortgage. It can provide peace of mind knowing your family will be taken care of financially if you pass away during the coverage term.

Benefits of Term Life Insurance

Term life insurance offers many advantages for those seeking affordable life insurance protection. Here are some of the key benefits of term life policies:

Affordable Protection When You Need It Most

Term life insurance is designed to provide protection during your working years when your family depends on your income. Premiums are significantly lower compared to permanent life insurance since term policies provide pure protection without any cash value buildup. This makes term life very budget-friendly, especially for young families who need coverage but have limited budgets. Term life allows you to lock in low rates based on your current age and health status.

Lock In Insurability While Young and Healthy

One of the biggest advantages of term insurance is the ability to qualify for preferred rates if you purchase coverage when young and in good health. Insurers offer lower premiums to those with young issue ages and excellent health markers. Once you secure a term policy, you can often renew it until later in life regardless of changes in health or lifestyle. Buying term insurance when young locks in insurability even if health conditions emerge later on.

Customizable Coverage Periods

Term life policies provide coverage for a specific period of time, typically 10, 20 or 30 years. This allows you to match the length of coverage to your specific needs, such as covering a mortgage or providing income replacement until children are independent. If your needs change, you always have the option to convert to permanent life insurance. The customizable coverage periods of term life insurance allow you to adapt your protection to your family’s evolving needs.

Types of Term Life Insurance

There are a few main types of term life insurance policies to choose from. Understanding the differences can help you select the right policy for your needs and budget.

Level Premium vs. Annually Renewable

The two primary categories of term life insurance are level premium and annually renewable.

Level premium policies have fixed premium payments for the duration of the term length. This means your monthly or annual premiums stay the same over the entire term, such as 10, 20, or 30 years. Level premium policies provide more predictability in budgeting for coverage. However, premiums are typically higher at the outset than annually renewable policies.

Annually renewable policies have premiums that can increase each year as you age. The insurer re-evaluates your rates annually based on your age bracket. While initially cheaper, over time your premiums will go up substantially. There is less cost certainty as rates may spike at renewal time depending on your health and age.

Term Lengths

The other major difference in term life policies is the term length or duration of coverage. Common options include:

  • 10-year terms offer the lowest initial premiums in exchange for shorter coverage. This can work well when you need temporary coverage for a specific need, like covering a mortgage.

  • 20-year terms offer a good balance of affordable premiums and longer coverage during your working years when your income needs protection.

  • 30-year terms provide the longest coverage and protection. Premiums are higher than shorter terms but remain level for decades. This is a good option for maximum family income replacement.

The longer the term, the higher the premiums. But longer terms lock in lower rates for a longer duration. It’s important to consider your budget, income needs, and the length of time you’d like coverage.

How Much Coverage Do I Need?

When shopping for term life insurance, one of the most important factors is determining how much coverage you need. There are a few key considerations when deciding on your policy amount:

  • Enough to cover debts and final expenses – Your life insurance benefit should be sufficient to pay off any outstanding debts like mortgages, car loans, student loans, and credit cards. You’ll also want to factor in final expenses like funeral and burial costs.

  • Income replacement – Many financial experts recommend getting a policy worth 10-12 times your annual income. This amount can help replace your income for 10-12 years, allowing your family to maintain their standard of living. For example, if you earn $50,000 per year, aim for $500,000 to $600,000 in coverage.

  • Future needs – Consider future expenses like college tuition for kids or other family members. You may need higher coverage if you have young children who will need support for many years.

  • Special circumstances – Think about any unique circumstances like family members with special needs or parents who may rely on your support later in life. These factors may warrant bumping up your coverage.

Your specific needs will depend on your family, finances, and obligations. Work with a licensed insurance agent to analyze your situation and determine the right amount of term life insurance to protect your loved ones.

Factors That Affect Cost

The cost of term life insurance depends on several key factors related to the insured individual. The two primary factors are age and health status.


Age is one of the biggest factors in determining term life insurance rates. Premiums are significantly lower for younger applicants in good health. Rates increase steadily as you age. Older applicants pay much higher premiums due to increased mortality risk.

Term life insurance pricing is also based on the length of the policy term. Longer terms typically have higher premiums since the insurance company is covering you for a longer period. Short term policies of 10-20 years have lower rates.

Health Status

Your overall health is another major rating factor. Applicants go through medical underwriting where the insurance company reviews your medical history and lifestyle. Those with chronic illnesses like heart disease, cancer, or diabetes will face higher rates or may be declined coverage.

Many companies also ask about lifestyle habits like smoking and vaping. Tobacco users pay up to 2-3 times more than non-smokers due to the increased health risks. Maintaining a healthy lifestyle can help you qualify for lower premiums.

Coverage Amount

The amount of coverage you buy also impacts your rates. Higher death benefit amounts equal higher premiums. Those who want a $1 million policy will pay more than someone with a $250,000 policy, all else being equal. But buying more coverage while young can lock in lower rates.

Adding Riders and Features

Term life insurance policies can often be customized with optional riders for an additional cost. Here are some of the most common riders to consider:

Accidental Death Benefit

An accidental death rider provides additional death benefit payout if the policyholder dies due to an accident. This extra payout can provide extra financial security for beneficiaries. Accidental death riders are often inexpensive to add, just a few extra dollars per month.

Waiver of Premium

A waiver of premium rider allows the policyholder to stop paying premiums if they become totally disabled. The policy will continue providing coverage even though premiums are waived. This protects policyholders from losing coverage when they are unable to work due to disability. It provides peace of mind about maintaining life insurance during difficult times.

Living Benefits

Living benefit riders allow accessing part of the death benefit while still alive if diagnosed with a terminal illness. For example, a policyholder diagnosed with a terminal illness expected to result in death within 12-24 months could withdraw 25-100% of the death benefit early. This provides financial assistance for medical treatments, daily living expenses, or other needs during illness. Living benefits give policyholders options if diagnosed with a qualifying terminal condition.

Riders like these can customize term life insurance to fit individual needs. Adding the right riders provides extra protections like accidental death coverage, premium waivers, and living benefits. Discuss options with an insurance agent when shopping for term life insurance. The right riders can provide peace of mind for just a small extra cost.

Shopping for the Best Rates

When shopping for term life insurance, it’s important to get quotes from multiple insurers before deciding on a policy. Here are some tips for finding the best rates:

  • Get quotes from at least 3-5 different insurance companies. Rates can vary widely between insurers for the same amount of coverage. Online quote tools make it easy to get quotes from multiple providers at once.

  • Consider getting quotes from independent brokers in addition to captive agents. Independent brokers have access to policies from many companies, while captive agents only sell policies from one insurer. Brokers may find you a better rate.

  • Look for companies that are highly rated by independent agencies like A.M. Best. Only consider insurers with an “A” rating or higher for financial stability. Avoid startups or companies with poor ratings.

  • Compare not just premium costs but also policy features. Make sure you are comfortable with the convertibility, renewal and portability options should your needs change.

  • Look for discounts like nonsmoker rates or multi-policy discounts. Taking steps like quitting smoking can significantly reduce your costs.

  • Consider length of policy. Longer terms like 20-30 years generally have lower annual premiums but higher overall costs over time.

  • Get a free annual re-evaluation of your policy to ensure you still have adequate coverage as your life situation evolves. Rates may improve over time.

Taking the time to shop around and compare term life rates can potentially save you hundreds of dollars per year. Finding the right balance of price, value and service will ensure you get quality coverage at competitive pricing.

Policy Underwriting

The underwriting process for term life insurance determines your eligibility and premium costs. When you apply for coverage, the insurance company will ask for information about your health, family history, lifestyle, occupation, and finances.

You’ll likely need to complete a medical exam as part of the application. This usually involves providing blood and urine samples, submitting to a physical exam, and answering extensive questions about your medical history. The insurer uses this information to assess your overall health and risk factors.

Several factors can affect your eligibility and premiums:

  • Age – Premiums are lower when you’re younger and healthier. Rates increase as you get older.

  • Gender – Women often receive lower rates than men of the same age.

  • Tobacco use – Smokers pay higher premiums than non-smokers.

  • Weight – Being overweight can increase your rates.

  • Family medical history – Conditions that run in your family, like cancer or heart disease, can increase your risk profile.

  • Prescription medications – Some medications may indicate higher risk of certain illnesses.

  • High-risk hobbies – Activities like skydiving or rock climbing can affect eligibility and rates.

  • Occupation – Dangerous jobs may result in higher premiums.

  • Driving record – Multiple tickets or accidents can increase your costs.

  • Existing medical conditions – Illnesses like diabetes or high blood pressure can result in higher premiums or denial of coverage.

The underwriting process aims to accurately evaluate your risk and determine fair premium pricing for the coverage amount you need. Being in good health and maintaining a low-risk lifestyle is key to securing affordable rates.

Maintaining Your Policy

It’s important to properly maintain your term life insurance policy to keep it active and effective. Here are some key maintenance tips:

Pay Premiums On Time

Be sure to pay your premiums on time and in full each month or year, depending on your payment schedule. Late or missed payments could result in your policy lapsing. Set up automatic payments or payment reminders if needed.

Update Beneficiary Information

Review your listed beneficiaries periodically and update them if needed due to life changes like marriage, divorce, new children, etc. You want to make sure the payout goes to the right person or people.

Consider Conversion Privileges

Most term life policies allow you to convert to permanent life insurance within a certain timeframe, usually near the end of the term. This allows you to continue coverage without new underwriting. Consider if this option makes sense for your situation as the term nears expiration.

Maintain Accurate Policy Records

Keep copies of your policy documents, premium payment receipts, and any other records related to your term life policy in a safe place. This will help ensure your beneficiaries can easily access payouts.

Properly maintaining your term life insurance is crucial to getting its full value. Pay premiums on time, update beneficiaries, consider conversion options, and keep accurate records. This will help secure your loved ones’ financial future.

Leave a Comment