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Term is the lowest cost and simplest product available. Term insurance
is a life insurance contract that provides protection for a limited
number of years. The death benefit is only payable if death occurs during
the agreed-upon term. If the insured survives the time period, the policy
expires. This means it has no cash value. However, some policies have
a convertible feature permitting a policyowner to exchange a term policy
for a cash value policy without evidence of insurability. Term is basically
designed to provide a maximum amount of protection for a temporary period
of time.
Term is sold in a variety
of forms and for a variety of purposes. The most common type is Level
Term. This form has a level (or constant) death benefit and a level
premium for a specified number of years. The most common are 1, 5, 10,
20, and 30 year terms. Decreasing Term is another version of term insurance.
It is generally sold with a level premium and a decreasing death benefit.
A variation of decreasing term is Mortgage Life Insurance. This is designed
to decrease at the rate in which a mortgage balance decreases. Mortgage
Life is typically offered as a rider in connection with a cash value
policy.
Advantages/Disadvantages
of Term Insurance
Term insurance is ideal
for families where protection is needed, but a minimum outlay of funds
is necessary. Term also works well as a supplement to cash value insurance.
Another common purpose of term insurance is to purchase it as protection
against debts such as mortgages, auto loans or education loans.
On the negative side, term
insurance provides only temporary protection, and there may come a time
when an insured has no protection after the term policy ends.
Get a term life insurance quote.
Read
the Term Life Insurance Buyer's Guide.
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