What Is Term Life Insurance?Question Answered On This PageHome
Term insurance can be described as a contract between a life insurance company and an individual which states that upon the death of this person a predetermined sum of money will be paid to the named beneficiary of the the insured. This policy contract may be owned by the insured or another individual or entity who has what is commonly referred to as insurable interest. The policy may be owned by a husband, wife, parent, business partner or the business itself. It may also be assigned to a bank or other lending organization as collateral. Until the loan in question is repaid the bank, mortgage company etc. owns the policy and the proceeds of said policy. This payment may be made in one lump sum or in the form of an income. There are many income arrangements to select from. Term life also takes many different forms. You can select from level death benefit policies for example. They usually last for predetermined periods as per contractual arrangement, for example, 5 years, 10 years, 15 years, 20 years, 25 years or 30 years. Some policies last to age 65, age 80 or age 90. the premiums, in most cases, also remain level throughout. In some cases the premiums remain level for 5 years and increase every 5 years. When you get to a predetermined time, for example, 10 years or 20 years the premiums level off and remain level for the rest of the term period. Another term policy where the premium does not remain level is the yearly renewable term, annual renewable term or increasing premium term policy. This policy can accurately be described as a one year term insurance policy. At the end of each year it can be renewed but at a higher price. The owner does not need to qualify all over again for the policy. Another popular policy is the decreasing term policy. This policy is usually used to pay off the balance owed on a mortgage if the insured should die while money is still owed. The premium is usually level but the face amount, or death benefit amount, decreases as the mortgage balance decreases. Because term insurance is usually for specific periods and because as people get older it is more difficult to qualify for a policy many term policies include a clause that allows the insured to convert to a permanent policy within specific periods of time. This is commonly referred to as the "conversion privilege" in insurance circles. A term life insurance policy is a powerful document. If used correctly it can secure a family after the death of a breadwinner thereby providing food, clothing and a roof over the heads of the heirs. It can save a business from disaster if a partner or shareholder should die. the beauty of it all is that it is so inexpensive.
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