If you’ve just gotten around to shopping for life insurance, there’s a good chance you’ve heard mention of term life insurance at least once. What’s it all about, you might be wondering? That’s exactly what we’re going to take a look at today, as we explore some of the basics surrounding term life insurance coverage.
What Is Term Life Insurance?
Unlike permanent life insurance policies, which last from the time you purchase them until your death, term life insurance provides a death benefit payout only if your death occurs within a specified time frame (10 years, 20 years, 30 years, etc.). If the term ends and you’re still alive, you can renew the policy for another stretch of time, if you so choose.
This is the short of it, naturally, and there are few more details you might find pertinent, like how it all works and who actually benefits from you having a policy.
On that first point, it all starts with you contacting an insurance provider and making a request to buy a policy. They’ll review your records, ask some questions about your lifestyle, and use their findings to determine how much you’d pay in premiums and your total coverage amount.
The amount of your policy will be paid to your beneficiaries upon your demise. In most cases, individuals use term life insurance to cover the costs of living for the immediate family members that they leave behind. Examples of what the policy would be used to pay for include:
- End-of-life expenses: This includes your funeral, burial, cremation, what have you.
- Mortgage or debts: If you still owe money on your home or other debts you accrued, your life insurance policy might be used to settle these.
- Dependent costs: If you have children, a term life insurance policy can be used to ensure that important expenses in their life, like child care costs, are covered.
- Day-to-day bills: The mundane household expenses matter too, and your family could use the benefits from a term life policy to cover them.
So, the most likely scenario after your death benefit is paid out is that your family will use part of it to cover your funeral costs and debts, then use the rest for other expenses.
Why Do People Choose Term Life Insurance?
What makes term life insurance an attractive choice for many? One of term life insurance’s most appealing characteristics is the fact that it’s often less expensive to purchase than other options. This is because the only benefit offered by term life policies is the death benefit. It’s simple, straightforward, and for most individuals looking for insurance, the best option.