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Term Life
Term life insurance is a type of life insurance that provides coverage for a specific period (term) of time, typically ranging from 5 to 30 years. If the insured individual dies during the policy term, the beneficiaries will receive a death benefit. However, if the policyholder outlives the term, the coverage expires, and no benefits are paid unless the policy is renewed or converted.
Key Features:
- Coverage Period: Term life insurance offers coverage for a specific coverage period such as 10,20 or 30 years. Once the term ends, the policy expires unless it is renewed, often at a higher premium.
- Death Benefit: If you pass away during the coverage period, your beneficiaries will receive the death benefit (a lump sum of payout), which can be used to cover expenses like funeral costs, debt repayment, or living expenses.
- Premiums: Premiums for term life insurance are generally lower than those for permanent life insurance, making it an affordable option for those seeking coverage during critical years, such as when raising children or paying off a mortgage.
Advantages
Term Life insurance Highlights:
- No Cash Value: Unlike permanent life insurance, term life does not accumulate cash value. This means once the term ends, you do not have a savings or investment component to draw from.
- Renewal Costs: At the end of the term, you may have the option to renew the policy, but it typically comes at a much higher premium due to your age and potential health changes. Some term policies offer the option to convert to a permanent policy before the term expires, providing a way to extend coverage.
- Best for Temporary Needs: Term life insurance is best suited for covering temporary financial obligations, such as paying off a mortgage, funding a child’s education, or ensuring that dependents are financially supported in case of a sudden death.