What Is Term Life Insurance?
Term life insurance, also known as term assurance, is a type of life insurance that provides coverage at a set rate for a specific period of time. During the term of the policy, the policyholder pays a fixed premium each year. This is usually longer than the policyholder’s life expectancy. This type of insurance is also referred to as relevant term life insurance. It is a good option for younger individuals looking for a more affordable life coverage option.
Term life insurance policies last for the period of the policy, usually until the policyholder retires. The amount of coverage should be sufficient to pay off the largest financial obligation. Most financial planners recommend 10 to 15 times one’s current income. Several factors influence the cost of life insurance. One of the most significant is health. Health insurance premiums are usually higher for people who smoke or use illegal drugs than those who do not smoke. Therefore, it is important to find a plan that suits your needs.
Premiums on term policies are not refundable, if you die before the end of the term. In that case, you simply paid the premium and received the fair value. However, some insurers offer a return of premium feature, but the premiums for these policies are typically higher than the cost of a non-return-of-premium policy. Furthermore, you have to keep the policy in force to take advantage of this feature.