Term Life Insurance Explained

Written By: Matthew B Hollance on August 31, 2010 No Comment

To explain it as simply as possible, term life insurance is a type of life insurance policy. It basically promises that you will make a set, fixed payment for a contracted amount of tie. This amount of time is known as the “term.” After this period of time though, your payments are liable to change and you will either have to simply meet the new payments or stop the policy.

It is a life insurance policy – in that it does not pay out for injury or accident not resulting in death. It only pays out if you die. It will pay the money out to the person you named as the beneficiary in almost all cases, unless, of course, there are reasonable grounds on which to dispute it.

There are certain circumstances in which term life insurance policies will not pay out even if the holder does indeed die, as there are with most insurance policies. An example would be if the premium payments were not up to date at the time of death or if there were any breaches of the policies terms. With most life insurance policies, there is also a clause that will deny payment if the death was a result of suicide.

However, what they are useful for is situations where the policy holder fears that, in the case of his or her death, there would be no means of covering any expenses. Such expenses include debts held by the policy holder, mortgages, the care of any dependents the policy holder may have and, of course, funeral expenses.

Term life insurance will often work out less expensive than a permanent life insurance policy and can often be used as a “bridge,” for those who are worried about leaving those expenses for their families. For example, someone approaching retirement who believes that, once they retire, they will have amassed enough money to cover said expenses in the event of their death, may use term life insurance just until they reach that point.

Find out more about term life insurance.