Term Life Insurance Explained
Posted on January 20, 2009
Filed Under Finances |
I can barely watch TV or surf the net without seeing ads for term life insurance. The ads usually have a famous celebrity or a couple of actors who are pretending to be the parents of a nice looking family.
Most of us know we need coverage, and we do not need a commercial to tell us that. By the number of ads I see, coverage must be available everywhere. However, many people still put off purchasing a policy. Rates are very cheap for most of us, so I do not think it is the cost. But I do think people still put off a purchase decision because they think the subject of life insurance is complicated and they will not understand what they are buying. Some other people think that the application process will be long and complcated.
So what is term life insurance, anyway? And why is this type of coverage so popular these days?
It is a temporary insurance contract, which means that it will expire after a term. The term usually ranges from 10 to 30 years, though I have seen many different policy length ranges on the market. Some policies last for one year, and some are meant to last until age 65 which is considered retirement age. The length of time you will want really depends upon your own financial goals and individual situation.
The policy does not usually build up any cash value, like whole or universal life do, but is thought of as “pure insurance”. Because it does not have a cash value, and because it is temporary, monthly premiums are lower than permanent insurance. You are only paying for life insurance, and not savings or an investment.
The idea behind buying this type of coverage is that any extra money, that might have been spent on cash value policies, should be saved or invested. Most financial professionals do not consider a cash value life insurance policy to be a very good investment, though some disagree.
But because you can purchase larger face value amounts of coverage for a lower premium, term life is very useful for covering a mortgage and other obligations in case one the breadwinners pass away. In fact, one of the most popular types of term life is marketed as mortgage life insurance, and it is specifically designed to pay off a mortgage in case the owner passes away so the rest of his or her family will be assured of a home. Many people add more to these policies than just the mortgage, though, because they also know their family will need money for utilities, groceries, and education expenses in the future.
Who buys term life insurance?
Many people who purchase term policies are younger families who want to provide their young families with financial security in case a breadwinner dies. Older people, even into their 70s, purchase these pollicies though, because they still have obligations they want to make sure get taken care of.
Author: Marilyn Katz
For more information, visit us. We define term life insurance in a simple way so you can make a good purchase decision. Find Term Life Insurance Rates and information with our fast, safe and free online quote forms too!
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