Term life insurance
[social_share]Term life insurance is a popular form of coverage that provides a fixed rate for predetermined span of time, which is known as the relevant term. Once the relevant term has passed, the buyer has the option of renewing coverage for a brand new term, albeit with a set of terms and conditions that are set without regard to the agreements of the expired term. The buyer, therefore, may end up paying more despite the fact that coverage has remained unbroken. If the buyer dies at any time during the effective coverage, a payout is issued to the party who is specified as the beneficiary. There can be more than one beneficiary and they are determined by the policy holder. This is also known as a death benefit.
Term policies are typically the most affordable form of coverage on the market, easily beating other policy types, such as whole life insurance and universal life insurance. These policies are set at fixed rates for the duration of the policy holder’s life. It is not uncommon to hear of term policy holders contrasting the costs of their coverage with that of whole or universal life and then investing the difference. This has become the shorthand, “buy term and invest the difference”. In this way, buyers with term life insurance secure a death benefit for loved ones and receive a return on the saved portion of their premiums if they choose to invest. As with standard insurance policies, however, if the insured party does not file any claims during their respective terms, they are not entitled to a refund of unused premiums.
Because term policies may expire with no cash-out issued to the beneficiaries, insurance companies who offer term are able to do so at cheaper rates than other types of life insurance policies. If the payout is achieved, however, the recipients’ employment of the funds is principally designed to satisfy any remaining debt on behalf of the deceased. The most common use of term life payouts is to cover funeral expenses and hospital bills, if incurred. Leftover funds are used at the discretion of the beneficiaries.
