Term Life Insurance: How It Works

Term Life Insurance also known as pure life insurance is a type of life insurance that comes with a limited period of coverage. Once the specified duration of time is up, it is then up to the owner of the policy to choose whether to extend or to terminate the coverage.

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Policies under term life give a fixed benefit/aid consequently at the time of the loss of life of the policy owner, provided that the loss of life happens within a specific period of time. Nevertheless, the policy doesn't provide any recompense beyond the death benefit, it doesn't have additional cash value, therefore, the only purpose term life insurance serves is to insure persons against loss of life and all the premiums the persons are going to pay are then used to cover the cost of insurance protection.
Term life insurance is a crucial way of caring for your loved ones financially after your death.

Before we take a look at how term life insurance works, let us look the characteristics and types of term life insurance

 

CHARACTERISTICS OF TERM LIFE INSURANCE

 Premiums are based on age, health and life expectancy of the person and is determined by the insurer via a medical exam which also includes other factors such as medications, occupation, smoker or non-smoker status, family history, driving records, etc.Also, it only pays a set death benefit because it is only for a brief and limited amount of time.

 

TYPES OF TERM LIFE INSURANCE

1. Level Term Or Level Premium
2. Decreasing Term

Under Level Term or level Premium, we have;
a. Yearly renewable term
b.  Five-year renewable term
c. 10-year term
d. 15-year term
e. 20-year term
f. 25-year term
g. 30-year term
h. Term to a specified age (usually 65)

 

How Does Term Life Insurance Work?

As earlier established, term life insurance is only valid for a specific period of time nominated by you. The most common are 10, 20 and 30-year period terms. The insurance policy is continually credible and binding as long as you pay the premium. Some of the perks of term life insurance are that the amount of premium you pay will not increase irrespective of the condition of your health, it assures you of a nominated death benefit. You are the one who sets the specific amount to be your death benefit and be assured that it will never change, irrespective of the life-span of the policy. What this means is that your insurance carrier pays exactly the amount you had earlier designated to your beneficiaries whether you die on the day your coverage is stated as valid or at its expiration.

In exchange of the insurance company paying the set amount to your beneficiaries, you will pay a monthly or yearly premium for the duration of your policy to it (i.e, the insurance company).

Finally, take time to examine a particular policy  to make sure it meets your needs for the price, and seek advice from seasoned insurance professionals.

When you purchase life insurance, you’re hoping to live till old age, that is not all, in the long run, you are also procuring peace of mind for yourself and your family in case that’s not on the program. Don’t leave your family stone-broke and impoverished in the sudden occurrence of your death. After all, they are your most treasured assets.