Term life insurance is a type of life insurance policy that provides a death benefit if the insured person passes away during the term of the policy. The policyholder selects the length of the term and the coverage amount. Here are some key features of term life insurance:
| Term Length: | Typically 5, 10, 15, 20, 25, or 30 years |
| Premiums: | Remain the same during the level term period |
| Death Benefit: | Only paid if the insured person passes away during the term of the policy |
| Renewal: | Can generally be renewed, but at higher rates each year |
| Conversion: | Can often be converted to a permanent policy without the need for a new medical exam |
Term life insurance is commonly used for income replacement to provide financial support for a family if the policyholder passes away during a certain number of years. To determine the appropriate coverage amount, consider the debts or obligations you want to cover and the approximate amount your family would need to maintain their standard of living during that time period.
Term life insurance is generally less expensive than permanent life insurance, which provides lifelong coverage and builds cash value. If you’re looking for a policy that builds cash value, consider a universal life insurance policy. However, it’s important to note that permanent life insurance is significantly more expensive than term life insurance.
When shopping for term life insurance, consider factors such as the length of the term, the coverage amount, and the policy features. It’s also important to compare quotes from multiple insurers to ensure you’re getting a good price.
Ultimately, term life insurance can provide peace of mind by offering financial protection for your loved ones if the unexpected were to happen.
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Article Sources
- Texas Employees Retirement System. Term Life Insurance: What It Is, Different Types, Pros And ...
- Investopedia. What Is Term Insurance?
- The Guardian Life Insurance Company of America. Term Life Insurance: How Does It Work?
- Prudential. What Is Term Life Insurance, And How Much Does It Cost?
- North Carolina Department of Insurance. What Happens At The End Of Your Term Life Insurance Policy?