What Is Term Life Insurance?
As what the name implies, term life insurance is a kind of life insurance that you buy for 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. Term life insurance is therefore among the cheaper plans that you can get 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, you can get term insurance policies that can span from 1 to 20 years. At the end of your term, you aren’t going to receive return on all money you’d paid towards the 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. As the premiums of term policy is around 10 percent of that whole life insurance policy, they’re typically the better choice. Whole life insurance policies on the other hand are offering protection along with investment opportunity.
By the time when the term policies matured, they’re going to 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. When the policy expired, you don’t actually need the insurance anymore as you got enough savings to rely on. Many people are getting this insurance coverage so by that, they will be able to reduce their debts as they’re getting coverage until they retire wherein most of their debts are paid off.
The death benefit of policy is reduced every single year in such policies while the premium amount stays the same. As a matter of fact, when the policy expires, the death benefit typically reaches zero too.
The term life insurance have got no cash value element since the premium amount you’re paying goes directly to the policy coverage and doesn’t accumulate or earn interest. However, there are plenty of benefits you can reap from term life insurance like the fact that it is cheaper, variable and universal life insurance policies.