What Is Term Life Insurance
What Is Term Life Insurance? A term life insurance policy provides coverage for a set period of time. If a claim is not made within the time period specified, the term life policy terminates. However, the person who purchased the policy can pay annual premiums to keep renewing it, thus keeping it for the length of time allowed by the insurance company. Term life insurance is considered by to be pure life insurance protection, with no bells and whistles involved, because it provides protection but doesn't build cash value.
Term life insurance works much the same as any other kind of insurance. If a claim is made during the term of the coverage, and the premiums are up-to-date, the claim is paid. If no claim is made, the policy either expires or carries over to the next year, usually at a slightly higher premium. There is no expectation of premiums being returned if a claim is not filed during the coverage period.
The most common form of term life insurance is called an Annual Renewable Term. In this kind of coverage, the premium is paid on a yearly basis, but the insured is guaranteed the ability to renew for as long as thirty years. This comes in very handy if someone is diagnosed with a terminal illness during the term of coverage. By purchasing the ART form of term life insurance, the insured makes certain that even if he or she is fully expected to die within that next year, the insurance company will not turn down their request for insurance, and thus, will also pay out their claim when they do pass away.
When a term life insurance claim is filed, it is meant to take care of the remaining financial obligations of the deceased. This can include paying off mortgages, taking care of consumer debt, paying for child care of minor children or college expenses of students, and contributing to any other responsibilities the deceased might have incurred before death.
Thinking about term life insurance is something most of us would rather avoid, but it's a necessity when you have a home and family to care for. Consider a term life insurance policy an investment in their future, and a way to provide for them if the worst does happen. It's better to be safe than sorry!