Term Life Insurance
Term life insurance provides coverage for a certain amount of time, i.e. a “term.” When you purchase a term life policy, you can purchase it for 10 to 30 years. If you pass away within this term, the insurance company will issue a payout known as a death benefit.
This death benefit is the main coverage you receive with a term life policy. This can range up to $1 million or more depending on the length of the term, your gender, and your age. The death benefit will be issued to the policyholder’s chosen beneficiaries. They will then be responsible to use the death benefit in the way agreed upon with the policyholder—so, it is very important to choose a trustworthy beneficiary.
If you as the policyholder do not pass away within the term, you have two options. You can let the policy “lapse” and let your coverage end, or, you can renew your policy for another term.
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Term life insurance is an excellent option for many individuals. It is far more affordable than other policies, while still providing a lot of coverage. The downside is the ending of the term, correct? Not necessarily.
It may seem like a hassle to figure out what to do when your term ends, but most insurance providers expect and allow renewal, and will offer incentives for you to do so. And, if you’re unhappy with your policy, you can go try a new one with a different provider.
One of the only potential downsides of a term life policy is the lack of cash value. There is not an investment option through a term life policy. Whole life policies do, and it is beneficial for many individuals. But not everyone wants or needs this component.
Term Life vs.
Term life policies are similar to a whole life policy because of their similar payouts. Both policies offer large death benefits—whole life policies, however, can potentially be larger. Whole life policies also last from the moment you purchase till the moment you pass away. Term life, on the other hand, only lasts for the term.
Whole life offers a cash value component, while term life does not. This means that you can gradually earn money from investments over time. Term life is also notably less expensive than whole life.
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