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Short Term Life Insurance

January 1, 2010

Short term life insurance is usually issued at the same time as short term health insurance, often a the time of a change in employment.  Changing jobs usually means a gap in group insurance coverage that typically lasts 1-6 months.  Almost one in ten Americans will have a gap in employer-provided insurance coverage this year.  An easy solution is short term insurance.  These plans are listed separately by state availability at MedSave.com.  Short term life insurance is the same as longer life insurance policies except that coverage is issued entirely online and the application process is completed on the same day.  The easy underwriting process allows coverage to be issued immediately and coverage can be cancelled whenever a replacement plan is provided by an employer.

There are two basic types of short term life insurance: 1) regular plans that cover death regardless of cause and 2) accidental death policies.  The second option is less expensive and often chosen by young people during a change of coverage because the risk of dying by from disease or natural causes is negligent for most young people during the time of a job transition.  In other words, the less expensive accidental death is more appropriate when used for short term coverage than it would be as a substitute for a long term life insurance policy.

Short term life insurance is available from $50,000 up to $250,000 with no medical exam.  Two of the most popular insurance companies for short term coverage are Guarantee Trust Life (for regular coverage) and HSBC Insurance "SmartLife".  Premiums can be paid month-to-month though automatic bank drafts or by check for 3 months, 6 months or 12 months of coverage.  The application is taken entirely online, including the electronic signature. Some companies use a short telephone interview to verify personal information.

In the event that coverage is needed for a longer period, the policy can be renewed at the same price for many years.  The maximum length of coverage varies between insurance companies.  Policies can also be converted into permanent insurance that does not expire as long as the higher premiums are paid.

To find the price of coverage, find your state page on the "Fast Quote" page and look for listings under the "life insurance" section near the top of the page.  Each carrier offers free online pricing based on a brief personal profile you enter in response to some simple questions.  Keep in mind that pricing is only accurate if your health status meets the requirements for that risk classification - this information is also listed online.

The online application asks the applicant to name a beneficiary of the policy.  If the beneficiary is another person, then life insurance is paid tax free to that person upon proof of death of the insured.  Insurance companies often also offer settlement options based on a fixed amount per month.  This is often a better way to replace income to support a family if that was the primary purpose of the insurance.

Policy issuance is confirmed with an e-mail within one day and policies are usually mailed within two business days.  To stop the coverage, simple stop the premium payments.

Higher amounts of insurance above $250,000 are available with a medical exam. That application process takes significantly longer so this tends to defeat the purpose of using short term life insurance. 

Note that the online term life insurance quoting system at MedSave.com that compare prices among multiple insurance carriers is not intended for short term life insurance.  This system searches many insurance companies for the lowest price life insurance plans, but these are almost never the instant issue type.  Most of these other life insurance policies take at least a month to process an application.  A full medical exam and review of medical records is required.  These insurers generally request a year's payment at the time of application and so this may not be appropriate for a short term need.

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