When Purchasing Term Life Insurance Makes Perfect Sense

You have come to a crossroad and need to decide whether you should buy term insurance, so you can "invest the rest", or purchase whole life insurance that has the power of its "cash value". Term life insurance is an easy-to-understand concept, in that it is usually touted as a "pure insurance protection" policy that excludes any of the cash value features that is typically inherent of whole life insurance policies.

How Long Term Insurance Last

Typical term life insurance will remain in effect for specified time that has been predetermined. The individual will pay a stated standard premium as long as the term life insurance policy remains in effect. Should the owner of the policy passed away, the death benefit will be paid directly to the beneficiary.

Why We Need Insurance

Generally, men and women purchase term life insurance as a way of providing protection for their loved ones, to lower or eliminate debt obligations. As an example, should you and your spouse own a home, that you both work to pay the mortgage, and one you dies, the remaining spouse would have to pay the mortgage on their own. Having term life insurance, the beneficiary could receive enough money from the policy to pay the mortgage off.

Filling the Gap

If what you are looking for is temporary life insurance protection, then term life insurance is the ideal policy for you. It works best when filling a gap, such as when an individual might not be protected under a standard life insurance policy, for whatever reason. Taking out a term life insurance policy on yourself still offers the best protection at times like these, to protect the interest of your family.

A Decreasing Payout

Term insurance can be ideally suited for many young working men and women who have families. A large 20 year term life insurance policy will pay off more should the owner by at the beginning of the policy, and greatly reduced the payout near the end of the term. For individuals with families, raising children will require more money earlier in the term, then at the end, making the conditions of term life insurance an ideal solution to this dilemma.

Covering Specific Debts

While term life insurance does not cover specific financial obligations, you can take out a policy for that exact reason. If you want the assurance that your family's finances will be substantial enough to send your children to college, or cover other living expenses, in the event that you should pass away, a term life insurance policy can ease your mind.

Various Term Policies

Most standard term policies have a decreasing beneficiary payout, in that every year the amount of the payout reduces over the life of the term. You can also purchase an "annual renewable term" policy which provides you coverage for the entire year, but offers the option of renewing it each year for a specified duration, such as 10, 15 or 20 years. Additionally, there is a "return of premium" term life insurance which simply states should there be no death benefit paid by the end of the term, you will receive all your premiums back.

 

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