4. Term Life Insurance Explained
Simply put, life insurance is a legally binding contract in which the insurer (usually a company) agrees to pay cash compensation to a designated beneficiary upon the death of the insured party. As long as the policyholder has kept up with his or her monthly premiums, the insurer is obligated to fulfill the terms of the contract if death occurs within the coverage period. In this way, life insurance is used as a means of protecting the current and future financial interests of the insured's dependents.
Term life insurance is one of the most common types of life insurance available today. It is an affordable way to get a maximum amount of coverage for a specified period of time, such as five, 10, 20, or up to 30 years in some cases. The monthly premiums are fixed for the duration of the contract, which means you pay the same amount in Month 1 as in Month 100. The fixed nature of this contract is a feature that sets it apart from the adjustable premiums of whole life insurance.
Consider These Advantages of Term Life Insurance
- Far more affordable monthly premiums than whole life insurance.
- Covers specific financial obligations that will disappear over time, including mortgages, childcare costs, or college tuition fees.
- Covers specific financial obligations that will disappear over time, including mortgages, childcare costs, or college tuition fees.
- Allows for the greatest amount of coverage at the cheapest prices.
- Provides protection when it is most needed, such as when young couples purchase a home for the first time or decide to start a family.
- Serves as an effective means of securing affordable, long-term coverage for up to 30 years.
Understand the Terms of Term Life Insurance
- Unlike whole life insurance, term life insurance policies build no cash value over the years.
- The death benefit is paid only if the insured dies during the coverage period. If this happens, the beneficiaries will receive the contractually agreed upon settlement.
- The death benefit for this type of life insurance is not subject to income taxes.
- Upon expiration of the original policy, renewal is possible. In general, however, monthly premiums on renewed policies increase significantly and are contingent upon the insured party's ability to furnish evidence of continued insurability (usually in the form of a medical exam).
- Should your coverage needs change during the contract period, policies with conversion privileges allow you to switch to permanent, universal, or whole life insurance without undergoing a new medical exam.
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We are committed to making your search for life insurance a positive and productive experience. If you have any questions about policies, coverage amounts, or any other aspect of term life insurance or whole life insurance, please contact us immediately.