Term Life Insurance

Posted by User Contributed

June 20, 2008

Term life insurance is one of the simplest forms of life insurance and it is considered to be the purest insurance protection because it doesn’t create cash value. This type of life insurance is totally in contrast to permanent life insurance such as universal life, whole life, and variable universal life insurance. Basically, term life insurance provides coverage for a period of limited time, the relevant term. The insured can obviously drop the policy after that specific period, and also can pay yearly increasing taxes or premiums to carry on the coverage. Suppose the insured dies during the term, the beneficiary will get the death benefits. Term life insurance if often one of the most inexpensive ways to purchase a substantial death benefit on coverage amount per premium dollar basis.

Term life insurance offers great value to an individual that needs a death benefit for a specific period of time. For example, term life insurance is a good choice for people that have started a family and need to consider paying for college, have amortized loans, or have a specific financial burden that will decrease over time. After the kids graduate from college, the amortized loans are paid down, or the specific financial burden has decreased, the need for cost effective high levels of coverage may not be as great. At this time your options vary.

Young families with large financial obligations are usually better off with term life insurance policies. Any discretionary income can be placed in other vehicles (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than life insurance policies. Whole life insurance is often purchased by people for tax and estate planning purposes.

Term life insurance rates have been dropping steadily in response to increased competition. Term life insurance is a commodity, and improved access to online life insurance quotes information is making it even more so. Whether to use life insurance as an investment is a separate decision; but for just pure life insurance, which is term insurance, why pay more than you have to?

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