Term life insurance provides death benefit protection for a specified period of time. Proceeds are payable to a beneficiary at the death of the insured, provided the death occurs within a specified period such as 5 or 10 years. Term life insurance is typically the least expensive type of life insurance as it covers a shorter period of time (i.e. from 1 to as many as 30 years) and does not include any cash value at the end of the term.
Term life insurance guarantees rates and coverage for an initial period. To remain covered beyond the initial contract you may need to sign a new application and pay an increase in premium. Since term policy premiums are based on the likelihood of your death, the cost of insurance increases as you get older. Term life insurance does not offer cash value, but can often be converted to "permanent" insurance, which can provide lifetime protection and build cash values.
Term Life Insurance Features
Here are a few of the features and benefits associated with term life insurance:
- Term insurance can be used on its own or to supplement a permanent life insurance policy and provide additional coverage
- Term Life Insurance is available in 1, 5, 10, 15, 20, and 30-year terms
- Think of term life insurance as "renting" your life insurance coverage, if you are interesting in "owning" life insurance, a permanent life insurance solution may be a better fit for you
- Certain riders (or options) can be attached to term life insurance policies which enhance the basic coverage offered under the policy
- Some policies offer you a return of premium option which allows you to receive a portion of your premium back if you surrender your policy
- Your beneficiary will be paid the face value of the policy if death occurs before the term expires
Common Uses of Term Life Insurance
Term life insurance policies can be used to help:
- Ensure that your children can attend college or that family living expenses are paid
- Cover new debt (such as a home equity line of credit, a home mortgage or a car loan)
- Avoid leaving a burden of debt on your loved ones if you die
You may also want to consider Credit Life & Disability Insurance, which is a type of life insurance designed to cover specific debt.
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