There are so many insurance words floating around these days. One in particular is term life insurance. What is it exactly is it?
What is term life insurance?
According to www.dictionary.com, term life insurance is described as, “Life insurance for which premiums are paid over a limited time and that covers a specific term, the face value payable only if death occurs within that term.”
So what does that mean. Basically it means, the person buying the insurance will pay a fee (usually a monthly fee), for a specific amount of coverage (dollar amount), that is only valid for an increment of years, such 10 years, 20 years, etc. The amount paid to the beneficiaries will only occur if the person buying the insurance becomes deceased during the term. At the end of the term, the person will need to consider renewing the policy or even buying another policy.
Why is life insurance needed?
Life insurance can be needed and used for several things. Anyone with a spouse/partner, children, or other family member who will be financially devastated by the death can benefit from the payout of life insurance. The person buying the insurance must list the name of the beneficiary/beneficiaries on the policy contract. The payout can go towards, mortgages, college funds, funeral and burial costs, and also used as a supplement to the lost income, according to the 5-Minute Guide to Term Life Insurance.
What should be considered when purchasing a policy?
When deciding which policy to buy, there are some things to consider. Age can determine the premiums charged. Many times as the age goes up, so does the premium. The amount of years in the term can also effect the cost of premiums.
The other thing that should be considered, is how much of a policy is needed. Nationwide’s 5-Minute Guide to Term Life Insurance, shows a few ways to determine the amount. One option is their Rule of Thumb, stating the amount should be 5-7 times the amount of the gross income. Another option is the Expense Calculation. The expenses are calculated with funeral and burial costs, emergency funds, debt, mortgage, college funds, and income replacement. The costs get added together to determine the amount.
There are several companies that offer term life insurance. Many of the insurance companies where home and vehicle insurance sell the policies. Shopping around and researching the different policies and contracts will help decide which policy is best for the buyer.