Explain Term Life Insurance Policy
A term life insurance policy provides a financial payout in the event of the death of the insured party. Term life insurance is sold for a "term" or period of years, after which the policy expires.
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Definition
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Term life insurance is defined as a life insurance policy that provides coverage for a specific period of time. Term life is often sold in 5-, 10-, 20- and 30-year policies, although these terms vary depending on the insurer. Unless action is taken by the insured individual, after the term expires, the life insurance will no longer be in effect.
Uses
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Young families and others that are dependent on a person's income benefit from term life insurance in the event of the supporting individual's death. A parent may purchase a term life insurance policy to provide protection until her children become adults or the family home is paid off.
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Advantages
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The primary advantage of term life insurance is that it is less expensive than other forms of life insurance. As the policy expires after a period of years, the insurer is not likely to pay out on most policies, which reduces their cost to provide the insurance. Many insurance companies allow conversion of term life insurance policies to other forms of life insurance before expiration.
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References
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