Term Life Insurance Explained
Term insurance is a very simple form of life insurance that provides coverage over a specified period. Often, these periods are 10 or 20 years, but this can vary. During the policy period, the benefit does not change, and the premium payments are typically made either monthly or yearly. Once the policy term ends, no premium payments are due any longer, and no benefits will be paid in the event of death. Those who wish to maintain coverage after the term ends must purchase a new life insurance policy for another term. Term insurance is often viewed as one of the most cost effective ways to obtain life insurance coverage. Learn more about term life insurance, www.ParamountLifeInsurance.com
Other forms of life insurance that are different from term life insurance include whole life, universal life and variable universal life insurance. These types of policies provide coverage for the entire life of the policyholder as long as premium payments continue to be made. Another significant difference is that these policies build cash value over time. As premium payments are made, portions of the policyholder’s payments are invested in interest bearing accounts that grow over time. This cash value is available to borrow against, or for withdrawal by the policyholder. The cost for this type of policy is often significantly higher than for a term life insurance policy.
The function of term life insurance is to provide cash to the policyholder’s beneficiaries in the event of death. This cash payment is ideally designed to replace the income that the policyholder might have been able to provide. It should also be designed to pay for accumulated debts and funeral costs. Family members are typically chosen as beneficiaries, but anyone can be listed as a beneficiary under a term life insurance policy.
One strategy often employed with term life insurance policies is to establish a term that will coincide with a milestone in savings. Once that milestone is reached, the insurance is no longer necessary as the savings can be used to replace income or pay off debts.
There are many forms of term life insurance products, but the most common is called guaranteed level premium term life insurance. In this type of life insurance, the premium does not change throughout the policy term. Payments are made either yearly or monthly for the coverage, and no payments are required once the term is complete.
Many term policies offer the ability to renew the policy after the term expires, although the company may require evidence of insurability in the form of a health exam. In this type of policy, the company may reject an applicant if the health exam produces negative results. Check on AARP term life insurance, http://www.paramountlifeinsurance.com/AARP-Life-Insurance.html
Term life insurance policies are less expensive than whole life policies will always involve some payout, while under a term life insurance policy, the possibility always exists that the policyholder will outlive the policy term, and that no payments will be made under the policy. Statistics show that payments are unlikely to be made under a term life insurance policy, which makes it easier for life insurance companies to offer this coverage at a lower cost.
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