Term life insurance is a policy that covers the insured for a set period of time, usually 10, 15, or 20 years. The insured pays a monthly premium, and the policy offers a level death benefit (meaning the death benefit does not change) should the insured person die during the policy time frame.
Term insurance is the most inexpensive form of life insurance, especially for younger and healthier applicants. Once the policy expires, you can then renew the policy or convert it to a permanent policy, with an increase in premiums.
However, if you choose not to convert your policy, and you outlive the term, you lose the death benefit. Term life also offers no options for accumulating cash value or investing. It is simply designed for “just in case.” So why would anyone choose this option?
First, the inexpensive premiums mean term policy is more widely accessible to those with lower income who need protection. Many parents choose term policies to cover income loss while their child is underage. If they die before the policy is up, they know their child will be provided for until they are able to financially support themselves.
Similarly, a term policy can be purchased for the length of a home mortgage period, and will pay off the remaining mortgage in the event of the insured’s death. The monthly premium is negligible compared to the peace of mind of knowing that your family will be able to stay in your home in the event of your death.
Parents might also consider term policies for their children in order to protect them from ineligibility later in life. A parent can purchase a policy for their child, and if the child develops a medical condition that might otherwise disqualify them, they can still maintain or convert their policy.
Term Life Insurance is a great option for anyone looking for an inexpensive way to protect and provide for their families.
