How Does Term Life Insurance Work?

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Feb 16, 2016

 

You’ve heard about term life insurance, but you’re not sure exactly what it is and if it’s something you should purchase. Here are some basics to help you decide if term life insurance is right for you and your family.

Term Life Insurance: A Definition

Term life insurance is a policy in which a premium is paid monthly or annually and insures the policy holder for a specified period of time. If the policy holder dies before the policy expires, a designated benefactor will receive a payout. There is no refund for an unused policy.

The Pros and Cons of Term Life Insurance

There are many pros to getting term life insurance. For example:

·         It has relatively low premiums yet still offers a large payout in the event of a death.

·         If you can no longer afford payments, simply stop paying the premium and the coverage ends. There is no contract.

·         It’s a great option for someone who is younger or doesn’t have life insurance benefits through their employer.

·         It’s an effective way to supplement your permanent life insurance when you are in a higher-need time, such as when you have a young family or if you have high financial responsibilities.

·         It’s possible to renew and convert term life insurance within a specified time period for an increase in cost.

There are also a few cons to consider, such as:

·         A payout is only given while you are still paying your premiums and if you die while within the specified period.

·         Premiums increase each time you renew your term life insurance policy.

·         The policy holds no “equity”. After the policy expires, there is no way to recoup the money that you paid over the course of the policy term.

·         When your policy expires, it’s possible that you will be uninsurable under a new policy if you have developed health issues or are newly considered high risk.

Once you’ve considered the pros and cons of purchasing term life insurance, you can then decide if it’s right for you and your family.

Contact Us for More Information

No one wants to leave this world without ensuring their family is taken care of financially. Living costs are the last thing that they should have to worry about during such an emotional time. Make sure you leave them eased of that burden.

If you want more personalized answers to your questions, please visit the professionals at Best Insurance Services Inc in Moreno Valley, CA. We are not only experts on term life insurance, but also whole life insurance and universal life insurance. We’ll go over costs and help you figure out which type of life insurance will benefit your benefactors the most.  



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