For many, buying insurance may seem like a complicated decision. This educational resource was developed for those curious as to what is term life insurance and how it can help protect your beneficiaries in the event of your passing. A comprehensive answer to questions similar to “What is term life insurance?” can be found here or on other pages within this site. In short, term life insurance is an agreement between you and an insurer to pay monthly premiums to help protect your beneficiaries and those that depend on your income in the event that you pass away. This may help give you some peace of mind in knowing that your beneficiaries may receive enough money to help replace your income and help cover your debts. So, what is term life insurance? It’s a choice you make today for the future financial security of your beneficiaries.
How Term Life Insurance Works
An understanding of how time life insurance works may be critical before deciding what policy could be right for you and your beneficiaries. Insurance companies may offer you a quote (request yours here) for a certain term life insurance policy. The policy is a contractual obligation between you and the insurance company. Your responsibility is to pay the premium; theirs is to pay the beneficiary if they ever need to collect on the policy. The policy generally remains in effect for the duration of the term, after which, your premiums and their coverage end.
How Term Life Insurance Policies Work
Before purchasing a policy, it may be important to understand how life insurance policies work. Typically, a policy will have three components: policy length, policy value, and premiums. First, the policy term may be quoted for terms of 10 years, 15 years, 20 years and in some cases, even 30 years. If, at any point during the term, a policyholder passes away, the policy value is generally paid to the named beneficiary. The policy value is the total amount for which the policyholder is insured. Typical policy values may range from $250,000 to $1 million, but the actual value may be selected to suit your preference. Finally, the premiums refer to your annual out-of-pocket costs to maintain the policy. They may be similar to a mortgage or car note in that they can be budgeted and must generally be paid regularly to maintain your policy in good standing.
Learn about Life Insurance
We encourage you to continue to learn about term life insurance by filling out an online form to see what a policy could do for you!