What Is Term Life Insurance?

By Patrick Cooper Posted in Life Insurance News

How Term Life Insurance Works

Term life insurance was one of the first forms of life insurance available. It provides life insurance at a fixed rate for a certain time period or term. After the time period or term expires, then the coverage at the former premium is not guaranteed and the insured must either go without life insurance, or get another policy with different payments and conditions if the same type of policy cannot be obtained.

If an insured party passes away while they are actively making payments on their term life policy, then the money from the policy would go to the beneficiary they named in the policy. Term life insurance is usually the cheapest way to go when buying life insurance. Term life only insures the person for as long as the premiums are made for the predetermined amount of time. In contrast, a person who buys permanent life insurance is guaranteed coverage for the whole length of their life.

Beware Of A Lapse In Payment

Term insurance works like car or home insurance. If the premiums are paid and up-to-date, then the policy is active. If the insured lapses on payments or is late then there is a risk of losing coverage. Even if one monthly premium is missed there is the risk of not being paid the death benefit. The premium rate is determined on several factors, namely how likely it is that the insurance company will have to pay out on the policy within the life of the insurance policy.

If you have a pre-existing condition or work in a high-risk field, your premiums may be higher than someone who is healthy with a sedentary job. Term life insurance is not recommended if you are looking for long-term coverage. Some people will purchase term life insurance before they leave the country for a trip or if they plan on embarking on a risky adventure such as parachuting out of an airplane or engaging in a life-threatening activity. Term life policies have gained popularity in this day of extreme sports.

Related posts:

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  2. What Is Term Insurance For Low Cost Life Insurance?
  3. What Is A Convertible Term Life Insurance Plan?
  4. How Much Life Insurance Do I Need?
  5. What Are The Different Kinds Of Life Insurance Plans?

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