What is Term Life Insurance?
Term life insurance is one of the simplest and most affordable life insurance available in the market today. Unlike other life insurances, term life is a life insurance with the intent of protecting an individual in the event of death for a period of time at a low cost premium with a large coverage. The specific terms of this life insurance usually spans from 5, 10, 20, to 30 years. The insurance coverage after the specified period of time of your purchased policy naturally expires but it is renewable. The terms available and the policies observed and adhered to are different for every insurance company.
The existence of the term life insurance is not meant to accumulate cash value but to serve as a protection for different personal reasons of the individual who makes a purchase. Some people buy a term life insurance because they want to ensure their family’s financial security in the event of their death. Others purchase life insurance to pay their debts or loans and liabilities such as funeral costs. Obligations such as mortgages or future educational expenses are also plausible motives to purchase term life. However, it should be clear that term life only protects an individual for a certain period of time and the individual could outlive the policy that was bought.
How it Works
Compared to whole life policies, term life is sustainably cheaper. An individual can purchase a large coverage insurance policy for a low premium. The insurance company and the individual agree on a contract of the premium amount to be paid for a specific period of time for a specified period of coverage. In turn, the insurance company promises to pay the immediate sum of money – in the event of the individual’s death – to the beneficiaries listed in the contract. In most term life insurance policies, the amount of premium to be paid for an agreed period of time usually does not change but this is very variable. Some insurance companies increase the amount of premium to be paid annually although this is to be agreed in the contract signing. There are also insurance companies who offer adjustable premiums and convertible insurance policies should the individual decide to change the type of life insurance to be insured with.
When the term life policy expires, the individual has the option to choose to renew the policy or to end it indefinitely. Both the coverage and premium to be paid also ends.
Purchasing Term Life
For an individual to qualify for term life insurance, the standard for purchasing insurance policies is observed. The individual will have to undergo physical examinations as well as blood work to be conducted by a nurse or any medical facility to ensure that the individual is insurable. Once this is done, the individual and the insurance company are now ready to draw and finalize the contract. The policy will remain in force as long as the premiums are paid and as long as the term doesn’t expire.