How Important is Term Life Insurance?

For years, term life insurance policies have provided peace of mind for loved ones if or when the insured member should pass away. If the policyholder should die during the preset eligibility period of the contract, payments of death benefits are made to the predetermined beneficiary. Temporary (abbreviated as term) life insurance policies are the most economical option for payment of death benefits during the active contract period. This means that overall death benefit paid per dollar amount of premium paid allows for maximum benefits at minimum cost to the insured. It is important to note that term life insurance policies are temporary, and no death benefits are paid if the member passes away after the contract is expired.

What is the Purpose of a Term Life Insurance Policy?

Term life insurance policies are meant to aid beneficiaries to supplement lost income of the deceased. Final expenses (funeral costs for example) and other living expenses are frequently used on term life insurance benefit payments. Costs normally covered by income, such as consumer debt, mortgage payments, and securing college education for the beneficiary and dependents are paid with term life insurance benefits. Term life policies are an attractive option for members who are currently employed and have a monthly income, as these policies allow time to properly save for retirement and ensure financial security for loved ones. While the term life policy is in effect, many contract holders will find additional revenue sources, such as a 401-k or IRA accounts. Finding other ways to accumulate wealth are necessary, as term life policies are not used for estate planning or leaving a legacy toward a charity.

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Types of Term Life Insurance Policies

As stated, term life insurance contracts are only temporary. These policies are frequently found in coverage periods lasting 10, 15, 20, or 30 years. The annual rates remains set throughout the life of the policy. Premium rates are determined by a variety of factors, including the length of active coverage and the insured’s physical health. Some, but not all, insurance companies will require a medical physical in order to determine one’s premium payment amount. However, an increasing number of insurance groups will not require the physical. At the expiration of the term life contract, more and more insurance companies offer an option to convert the insurance to a whole life policy. With whole life coverage, age limitations are removed and premium payments will be altered. The fixed amount which makes term life policies attractive are replaced by premiums that will gradually increase during the whole life contract.

Life insurance is meant to provide financial security for the insured’s family members. Those who have children are strongly encouraged to obtain life insurance, so living expenses and college costs can be provided in case of death. The coverage period one selects can be determined by the age of the children. Speaking with a life insurance agent, a term life insurance contract that best suits your loved one’s needs can be determined.

Frank Harrington is an ex-insurance professional who now writes for, where he discusses a range of topics, including how to compare insurance. He spends his free time trying to work out the best strategy for stock trading.

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