What is Term life Insurance   by Dwayne

in Insurance / Life Annuities    (submitted 2011-11-09)

Many people get the phrases "term life" and "whole life" confused. Still others don't really know what it means at all. The key answer to the question, "what is term life?" is given right in its own phrase--the word "term."
Term insurance, simply put, is a straightforward policy written out for a number of years--anywhere from 5 years to 30 years long. There are terms available for as short as one year, as well, but the most commonly purchased terms are 10, 20, and 30 years. Additionally, term life insurance does not have an investment component (as seen in whole life insurance).
Essentially, term life insurance is a relatively inexpensive way to get a death benefit for those left behind (termed the "beneficiary"). There is no complicated investment component or estate tax component. It is very simple: purchase a policy for a certain amount of time, and, should the insured die prior to the expiration of the policy, the beneficiary will be paid the predetermined death benefit.
Who Needs Term Insurance?
Term life insurance is basically a good idea for just about anyone. Mostly, people familiar with term life insurance believe it is for the breadwinner of the family. But this is not necessarily the case. Some people purchase term life insurance for stay-at-home moms or dads--for example--because the work they do at home is invaluable; they take care of the children, the cleaning, the cooking, and other domestic duties. Those things will have to be taken care of when that person passes on--and typically babysitters/nannies and cleaning services cost quite a bit of money when done "for hire."
Still others purchase term life insurance to cover things like:
• Funeral expenses (burial, cremation, closing services)
• To pay off mortgages and other debts
• Loss of income due to death of co-earner
• To ensure college funds are set up for children
There are plenty of good reasons to get a term policy. However, not everyone will qualify for them, due to health and age. So, the younger a person is, the better a term policy will be.
Life after Term Expiration
It's definitely good when a loved one outlives the term of a life insurance policy. However, many people think that they won't get anything from their 30 year investment. Not so. Some policies allow the person to get their premiums returned upon the termination of a policy, as long as they've made their payments properly, and, of course, they are still alive. This can sound like an investment, but since there is no investment or interest, it would be like putting money under a mattress for 30 years (or however long the policy lasts).
Most people opt for conversion, renewal, or extension of their term life insurance policies:
• Conversion: Some insurance companies will allow a conversion to a whole life policy.
• Renewal: Allows the insured to continue to pay in without changing the policy.
• Extension: Allows the insured to keep the policy, but typically tacks on additional premium costs/rates.

About the Author

My Insurance Expert will help you find term life insurance that fits all of your individual needs. The world of life insurance doesn't have to be difficult. With the right advisor you can give your family the protection they need and have peace of mind.