As what the name implies, term life insurance is a kind of life insurance that you buy for set period of time. Since these policies don’t have cash value component, the amount you’re paying for premium is being used to keep the policy active. These premium amounts ought to be paid for the term of the policy and the moment that it is terminated, you then stop paying the premium as the coverage expires. With this being said, when it comes to term life insurance, it is the cheapest option that you can get.
However, term life insurance is divided into level term where the death benefit and premium stays constant for the whole length of term regardless if it is 10 years, 20 or even 30 years long. Term insurance policies are most of the time obtained for specific terms which span from 1 to 20 years. At the end of the term as well, you don’t receive return on all money you’d paid towards the policy.
On the other hand, your loved ones are going to get the full amount of the policy in the event that you die prior the termination of your term. As for the rates of term life insurance, it stays for the same amount and it will be cheaper than whole life policy rates. They’re typically the better choice as for the premiums of term policy is around 10 percent of that whole life insurance policy. On the other hand, whole life insurance policies offer protection together with investment opportunity.
By the time when the term policies matured, they’re going to expire without investments. This is nothing to be worried about as it is often wise to pay for protection and use the cash remaining for making smart investments. Aside from that, you don’t necessarily need the insurance anymore as you got enough savings to rely on by the time when the policy expired. There are many people who are getting this insurance coverage in an effort to reduce their debts as they get coverage until they retire wherein most of their debts are paid off.
The death benefit of policy is reduced every single year in such policies while the premium amount stays the same. As a matter of fact, when the policy expires, the death benefit typically reaches zero too.
The term life insurance have got no cash value element since the premium amount you’re paying goes directly to the policy coverage and doesn’t accumulate or earn interest. But there are many benefits for getting term life insurance like the fact that it is cheaper, variable and universal life insurance policies.