An Understanding of Term Life Insurance Definition

2007-03-08 10:33:40

( Insurance )



Term life insurance definition – term life insurance only provides purely life insurance protection; it does not have an increasing cash value, and only covers you for a specific term or period. There is an existing death benefit in this type of insurance, but it is only awarded to the beneficiary when the insured party dies during the term covered. Included in the term life insurance definition is the term, “cheap term life insurance” which is another way of identifying term life insurance.

The policies and conditions of a term life insurance policy are easily understandable, and have very little contractual provisions between the insurance policy holder and the company. Death benefits are guaranteed for the entire period of coverage. Low cost term life insurance is easily affordable because you only pay for the period that you need coverage for.

Some people use the death benefits of a term life insurance to save for the college education of their children; while some, use the funds to settle their mortgages, use it to operate a small business, create a revolving fund for future expenses or pay off their family members’ debts.

The simplest form of term insurance is one that is purchased with one-year annual renewal term coverage. The premium is paid for a one-year coverage, and gives you the option to renew at the end of the policy year. The common renewable periods would then be anywhere from 5 – 30 years in five-year increments or until a person reaches the age of 95. The premium rate increases according to the policy holder’s age and sometimes ends up being the face value of the policy. The longer the coverage year you purchase, the better your costs can be spread out to avoid a high annual rate increase.

There is also a convertible term life insurance that provides the maximum protection with a low initial payment. This is recommended for younger people who wish to purchase a life insurance, but cannot afford to do so because their income does not permit it. Convertible term life insurance allows them to pay for cheap term insurance and convert it later on to a more permanent life insurance plan.

For as long as you keep your premium payments up to date, a term life insurance can pay the death benefit to your beneficiaries in cash; almost always, no tax is charged against the funds.

Term life insurance definition only provides you a guidance about term life insurance. It is better to check with an insurance company for more information on other benefits that a term life insurance can offer.


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