You don’t buy life insurance because you are going to die, but because those you love are going to live.
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Term Insurance is a policy type that offers maximum protection on face value (death benefit) but has a very low cost of premium associated with it.
Generally speaking, it offers a guaranteed payment of a stated death benefit if the covered person dies during a specified term.
Term policies are specifically for those who have very specific or high needs of protection. A good example would be a family with multiple expenses like a home, vehicles, college planning, etc, and possibly a single working parent or even a couple working. A term life policy would be affordable and offers the financial protection should one of the pass away.
When you buy a term life insurance policy, the insurance company determines the premiums based on the policy’s value (the payout amount) and your age, gender, and health. In some cases, a medical exam may be required. The insurance company may also inquire about your driving record, current medications, smoking status, occupation, hobbies, and family history.
If you die during the policy term, the insurer will pay the policy’s face value to your beneficiaries. This cash benefit—which is, in most cases, not taxable—may be used by beneficiaries to settle your healthcare and funeral costs, consumer debt, or mortgage debt, among other things.2 However, if the policy expires before your death, there is no payout. You may be able to renew a term policy at its expiration, but the premiums will be recalculated for your age at the time of renewal.
Term life policies have no value other than the guaranteed death benefit. There is no savings component as found in a whole life insurance product.
About Term Life Insurance