What is Term Insurance?

As you may have guessed so far, Term Insurance of Term Life Insurance is in its basic form a death benefit bought against the risk of death on the insured. In its basic form, you pay a one year premium for the one year that you are covered against death. The insured is the person that the policy is bought for and isn’t necessarily the person that pays the premium. If the insured dies within the period of the coverage then an agreed sum is paid out to the beneficiary. The beneficiary is the person(s) that will receive the benefits of the insurance policy if the insured dies. This is normally the family members that are specified as the beneficiaries of the insurance policy.

The thing that makes term life insurance products so attractive is that if you play your cards right then it is one of the least expensive methods to purchase a comprehensive benefit upon death coverage at low yearly premium prices. The cheapest and generally most affordable is the straight term life insurance that is renewable every year. There are other sorts of life insurance products like universal life, variable life insurance that have added elements to the coverage but these extras will also mean that you pay more. We will touch on these in a different part of the website.

The concept of term insurance products isn’t unlike that of other insurance products we see everyday. Its main purpose is to satisfy claims made against what is insured. In this case, the death of a person (the insured) with the claim paid out to the beneficiary. As with all other insurance products, claims are only paid out to those contracts that are current and have their premiums paid in full. Premiums have to be paid on the insurance product to keep the contract and coverage current. Some people mistakenly think that premiums are refundable when a claim is made. This is not the case as the premiums are what you way to hedge against the risk of a certain event happening. It is never refundable.

In its purest form term insurance is used as a death benefit so that the financial responsibilities that the obligated to can continue even if they die. These responsibilities are normally costs that will otherwise fall to the lap of the family member should the insured die. These would include mortgages, car financing, funeral costs and even the future college education of their children.