Term Life Insurance
Although many families hate the idea of paying money for something that only pays upon death, a term life insurance policy is the foundation to a family's financial plan. It offers the beneficiary piece of mind knowing that, given the premature death of the insured, the family is covered.
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Definition
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Term life insurance is life insurance protection. It pays cash to the beneficiary upon the death of the insured. Unlike cash value insurance, term insurance has no cash value or savings associated with it. For this reason, term insurance is less expensive than cash value insurance.
How it Works
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Term insurance is sold in renewable "term periods." Options include a one-year term, five-year term, 10-year term, 20-year term and 30-year term. The price stays the same during the term period. Once the term is up, the insured has the option of canceling the insurance policy or renewing at a price specified by the insurance company.
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Applications
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Because term insurance is inexpensive, a family should use term insurance to get the most life insurance coverage for dollars invested. It's ideal for young families who have many bills but little to no financial assets. So, if the breadwinner dies prematurely, the young family can use the life insurance proceeds to continue on.
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References
- Photo Credit Family portrait of young family on picnic image by YURY MARYUNIN from Fotolia.com
