Term Life Insurance Basics

If you have yet to purchase life insurance to protect your family in the event of your “untimely demise” as they say, you may be a loss as to where to begin to start to learn about it. Term life insurance is the simplest form of coverage that you can buy, and for this reason it is a great place to start your education.

The best thing about term life is that it is completely straightforward. The premium payment that you make every month ensures that the insurance company is obligated to pay out a fixed amount to the beneficiaries, your loved ones as named in the policy, in the event that you died during the term of the policy. This payout amount, or death benefit, is defined clearly, as is the amount of your monthly premium payments. An explicit condition contained in this contract is that if you as the policyholder do not pass away during the term of your policy, then the life insurance company will pay out nothing. If you understand the basic points that I’ve just outlined, term life insurance should no longer be a mystery to you.

If you’re pricing term life insurance policies online or in direct mail advertising, you’ll notice how cheap the premiums are for coverage amounts that sound like quite a lot of money. Is there a catch? There is no catch, but this leads us to a second point of which you should be aware regarding term life, and that is that most people do outlive their term coverage. Since payouts on term policies are fairly uncommon insurance companies can afford to promise large payout amounts for what sounds like fairly low premiums.

Since most people survive their term policy, does this mean you should reconsider getting one first-place? Absolutely not. If you have people who depend on you, whose finances would be negatively impacted by your absence, life insurance in whatever form you eventually choose is certainly something into which you should look. And, the fact is that most financial experts recommend term over more complex and costly permanent life for most people. Term life is a good combination of taking basic financial responsibility for your family, while allowing yourself some financial breathing room, in that the lower premium amounts will hopefully result in money being left over each month so that you can build a responsible financial portfolio for retirement. As always you should consult your financial planner for specific advice, but term life insurance is most likely going to be a part of your overall financial profile.

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