Overwhelmed by the Complexity of Resources? This May Help

What Is Term Life Insurance?

As what the name suggests, you can buy term life insurance for a set period of time. And because of the reason that these policies don’t cash value component, the amount you’re paying for the premium is used to keep the policy active. These premium amounts need to be paid for the term of policy and when the policy or term is terminated, you stop on paying the premiums as the coverage expires. Therefore, term life insurance is among the cheaper plans you can buy for life insurance.

On the other hand, the term life insurance is divided in level term wherein the death benefit and the premium stays constant for the whole length of the term no matter if it’s 10 years, 20 or even 30 years long. Most of the time, term insurance policies are obtained for specific terms which span from 1 to 20 years. Not only that, at the end of term, you do not receive return on all money you’d paid towards your policy.

On the other hand, your loved ones are going to get the full amount of the policy in the event that you die prior the termination of your term. Rates of term life insurance will stay for the same amount and is going to be cheaper compared to whole life policy rates. In regards to the premiums of term policy, it is around 10 percent of that whole life insurance policy, which is typically the better pick. On the other hand, whole life insurance policies offer protection together with investment opportunity.

When the term policies matured, they will expire without investments. This is nothing that you should be worried about as it is wise to pay for protection and make use of the remaining cash for investments. Aside from that, you don’t necessarily need the insurance anymore as you got enough savings to rely on by the time when the policy expired. There are a lot of people getting this insurance coverage so by that, they can reduce their debts as they get coverage until they retire wherein most of their debts are paid off.

In such policies, the death benefit of policy is reduced every single year while the premium amount stays to be the same. When the policy expires as a matter of fact, the death benefit usually reaches zero too.

And due to the reason that the premium amount you’re paying directly goes to the policy coverage and doesn’t accumulate or earn interest, the term life insurance have got no cash value element. But there are benefits for buying term life insurance like the fact that it is cheaper, variable and universal life insurance policies.

Cited reference: see here