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What Is Term Life Insurance?

As what the name suggests, term life insurance is a type of life insurance you can buy for set period of time. Since these policies do not have cash value component, the amount you pay for the premium is used for keeping the policy active. These premium amounts need to be paid for the term of policy and when the policy or term is terminated, you stop on paying the premiums as the coverage expires. Term life insurance is therefore among the cheaper plans that you can get for life insurance.

But the thing is, term life insurance is divided into level term to which the death benefit and the premium stays constant for the whole length of term no matter if it’s 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, in the event that you die prior the termination of your term, your loved ones will receive the full amount of the policy. The rates for term life insurance stays for the same amount and will be cheaper than whole life policy rates. In regards to the premiums of term policy, it is around 10 percent of that whole life insurance policy, which is typically the better pick. With regards to whole life insurance policies, they are offering protection together with some 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. When the policy expired, you don’t actually need the insurance anymore as you got enough savings to rely on. Many people are getting this insurance coverage so by that, they will be able to reduce their debts as they’re getting coverage until they retire wherein most of their debts are paid off.

In such policies, the death benefit of policy is reduced every single year while the premium amount stays to be the same. When the policy expires as a matter of fact, the death benefit usually reaches zero too.

Term life insurance have no cash value element because the premium amount you pay directly goes 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.