Term life insurance is life insurance that provides coverage for a limited period of time and it's under fixed payments. Upon the expiry of the period, coverage at the previous premiums rates is not guaranteed and the client either forgoes the coverage or he/she potentially obtains more coverage with different conditions or payments. In case the insured dies during the term, then the death benefit is paid to the beneficiary.
Term life insurance is the cheapest way to buy a substantial death benefit at a coverage amount on each premium dollar basis on a certain period of time.
What is term life insurance? It's the original form of life insurance that can be compared to permanent life insurance like universal life, permanent life insurance as well as variable universal life.
This guarantee coverage for some fixed premiums on the lifetime of the individual who is covered. The term life insurance is not only used for charitable giving strategies or estate planning but it is usually used for pure income replacements on the needs of an individual.
It works in a way which is similar to other types of insurance since it satisfies the claims which are made against the insured in case the premiums are not expired and are up to date.
Because term life insurance is simply used for death benefit, the primary usage is to cover for financial responsibilities for one who is insured or his beneficiaries.
This kind of responsibilities can include although not limited to dependent care, mortgages, funeral costs, university education for children, dependent care and consumer debt. This is because it is usually chosen over the permanent life insurance since it is usually less expensive as it depends on the length of the chosen term.
One of the simplest forms for term life insurance is a period of one year. Then, a death benefit is paid by the company in case the insured has died during a term of one year while there is no payment of any benefit in case the insured dies even one day after the one year term has past after the last day.
The premium that is paid is based on the profitability that was expected in case the insured dies in that same year of the term insured.
Purchase of one year is usually rare because of the likelihood of a person dying the next year is usually low for everyone that the insurance company accepts to cover.
The term life insurance quotes that the main challenges with some policies is the need of proof for insurability. For example, in case the insured gets a terminal illness in the period that he or she was insured, and does not die until when the term expires.
Thus, because of the terminal illness he or she would be un-insurable after the initial term has expired.
He or she would be unable to renew that policy or even be able to purchase in a new one. There are some of the policies that offer a feature that is called guaranteed rein-stability which allows the insured to be able to renew without having the proof of insurability.
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