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What Is Term Life Insurance? - Your Guide To Term Insurance
Term life insurance is, put simply, a financial package designed to protect those who depend upon you for monetary support in the event of your passing. Term insurance is guaranteed level-premium insurance, where the premium you pay is guaranteed to be the same for a given period of years. Term life coverage is the least expensive insurance policy available. It allows you to spend a lot less on your monthly insurance premiums and use the extra funds in another investment. Term life does not build up cash value the way a whole life policy does, and the insurance premium normally increases as the policyholder grows older upon each renewal.
So how does this compare to whole life insurance? A term life policy is taken out to cover the event of the insured's death. Term life is exponentially cheaper than whole life insurance. Unlike whole life, term coverage is relatively inexpensive. If you're on a tight budget, you may still be able to afford all the insurance coverage you actually need.
Term insurance rates are fairly simple to understand. Term life offers lower premiums than other types of life insurance, and this is the most tangible benefit. Since term insurance policies are for a specified period only, they must be renewed when each term ends. Before buying a term insurance policy, you should investigate the renewal provisions for the protection of your future insurability.
One type of term insurance is referred to as level term, where the premium being paid is the same for a specified period of years. Common durations for level term insurance policies are ten, fifteen, twenty, also thirty years. The amount of money to be paid each year is the same. The longer the term, the higher the premium that has to be paid, since premiums are more expensive as you get older.
Another kind of term insurance is the annual renewable term. This is a one-year policy where death benefits are paid to the beneficiaries by the insurance company if the insured dies within the period of one year. Death benefits will not be paid, however, if the insured dies after the last day that the one year term expires. However, the certainty of anyone dying in the period of one year is low. This means that purchasing a single year of coverage is not usually done because it's not cost effective.
A term life policy is a legal contract, and it specifies the terms and conditions of the risks assumed and the benefits offered. Any misrepresentation by the policyholder or the insured will be grounds for nullification of the insurance. Also, before you engage in any insurance policy, you should be aware of any part of the insurance policy that levies fees when you cancel.
Rising costs for food, shelter and other necessities have led to a decline in insurance coverage for many families. USA Today estimates that as many as 11 million households in the United States do not have life insurance coverage for the primary wage earner. In fact, just slightly more than 40% of all households have life insurance covering the wage earner, leaving a coverage gap of a whopping 60%. The lack of adequate life insurance has resulted in some tragic consequences for families in all walks of life. Term life insurance is one hedge against rising costs that will protect your family even when you are no longer around. What is term life insurance? It's a necessity.
