Term life insurance is pure insurance. When you purchase a term
policy, you are buying coverage for a specific period of time. If you die
within the time period specified in your policy, the insurance company will
pay your beneficiaries the face value of your policy.
Term
insurance offers temporary protection. This differs from the permanent
forms of life insurance, such as whole life, universal life, and variable
universal life, which generally offer lifetime protection. And unlike other
types of life insurance, term insurance accumulates no cash value. You dont
receive a refund at the end of the policy period if you havent died. Term
life insurance maybe appropriate for temporary life insurance needs or when
your cash needs make permanent life insurance unaffordable.
Term
insurance is sold for a specified period of time. Annual renewable term
life insurance is renewable every year, without proof of insurability. The
main drawback associated with annual renewable term, as well as other types
of term insurance, is that premiums increase every time you renew your life
insurance coverage. The reason is simple: As you get older, your chances of
dying increase. And as the likelihood of your death increases, the risk that
the insurance company will have to pay a death benefit goes up with it.
Unfortunately, term insurance can become too expensive right when you need
it most that is, in your later years.
There
are several variations of term insurance that allow for level
premiums. For example, you may be able to obtain 5-, 10-, 20-, or even
30-year level term, or level term payable to age 65. In addition, you can
buy decreasing term life insurance, for which you pay level premiums for a
death benefit that decreases every year. Each of these types of term life
insurance has its own particular uses. For example, decreasing term
insurance is often used to provide the funds to pay off a home mortgage if a
spouse dies.
Life
insurance can be used to achieve a variety of goals.The cost and
availability of the type of life insurance that is appropriate for you
depends on factors such as age, health, and the type and amount of insurance
you need. If you are considering purchasing life insurance, consult a
professional to explore your options.
© 2003 Emerald
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