Term life insurance is insurance coverage for a specific period of time. It does not build up any cash value like other forms of life insurance like whole life, universal life and variable universal life. It is basic life insurance coverage that pays a death benefit to the insured’s beneficiaries.
Term life insurance is for a person who is looking for low cost insurance coverage for a specific period of time. The individual can choose the period of time they would like to have insurance coverage for. This could be a term of anywhere from a year up to thirty years or more. Once the term expires, the insured can either discontinue the policy or renew it. If they decide to renew they may pay a higher premium based on their age, health or other factors.
If the insured dies within the term that is covered by the insurance policy, the death benefit will paid to the insured’s beneficiaries. If the insured dies after the life insurance term has expired, no benefit will be paid.
Term life insurance is generally the least expensive type of life insurance. There is no cash value to recover, it is straight coverage to pay a death benefit to the beneficiary in the event that the insured dies within the term period.
This form of life insurance is best suited for someone who is looking for inexpensive life insurance coverage for a specific period of time. Some people may want to invest in term life insurance while their children or young or have other obligations. Others may invest in term insurance to pay for funeral or other specific expenses in the event of their death.
The advantages of term life insurance are that it is affordable, renewable, flexible and easy to understand. When the term life insurance coverage expires the insured has the option of reviewing their situation and renewing the policy, although they may end up paying higher premiums by doing it this way. With whole life and other forms of insurance, the premium does not continue to rise each year the way it does with term insurance. Many insurance companies also allow the insured to convert their term life insurance into a whole life insurance policy. Therefore, a term life insurance policy does afford a great deal of flexibility which allows the individual the opportunity to review their financial and life circumstances and adjust their life insurance needs accordingly.