What is term life insurance?
This is a question that many people find themselves asking at some point in their lives as they begin to think about how they can protect their families and their future. Term life insurance is a specific type of insurance that offers coverage only for a specific time period. Some of the most common periods of coverage for term life insurance are ten, fifteen, twenty and thirty years. Following the end of that time period, the individual may choose to drop that insurance policy or they may elect to convert the policy into another policy contract. Another option would be to pay premiums that increase on an annual basis in order to continue the insurance coverage. In the event the person who is insured should die during the term of the coverage, the death benefits will be subsequently paid to the designated beneficiary. Term insurance is typically the least expensive way to buy substantial life insurance benefits, which is one reason why it is so popular.
How Does Term Life Insurance Work?
Term life insurance offers the covered individual guaranteed premiums as well as a specified amount of insurance coverage for a specific time period. Term life insurance is also frequently known as pure protection. It should be understood that there is not an accumulating cash value associated with term life insurance, which is a feature that is included with universal life, whole life and variable life insurance. Most term life insurance policies offer the additional option of being able to convert the policy to a permanent life insurance product, such as a universal life or whole life policy at some point during the term. Generally, there is no medical evidence required to convert the policy.
Many people decide to purchase life insurance when they wish to have the security of a guaranteed lump of money to provide benefits to their families in the event of their death, such as income, college education expenses, etc. Some people decide to purchase life insurance because they wish to be able to make a specific amount for a cash bequest to a favorite charity. The desire to protect family members from debt can also be a driving cause for purchasing life insurance. For instance, family members can use the proceeds from life insurance to pay the remaining balance on a mortgage in the event of a death.
Due to the fact that there is no cash accumulation associated with term life insurance, it is primarily designed to establish a specific amount of capital for survivors during a fixed period of time. At the same time, term life insurance provides the lowest possible outlay of cash during the time the protection is desired.
When buying term life insurance, keep in mind that it can be a good idea to shop around and compare rates and policies from more than one company. This can help you to locate the lowest possible rates and the best term life insurance policy for your specific needs.
