What Is Term Life Insurance?
Term life insurance guarantees payment of a stated death benefit during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate.
How Term Life Insurance Works
Term life policies have no value other than the guaranteed death benefit. There is no savings component like there is in whole life insurance products. The policy’s purpose is to give insurance to individuals against the loss of life. This cash benefit may be used by beneficiaries to settle the policyholder’s healthcare and funeral costs, consumer debt, mortgage debt, or financial consideration for minors or spouse. Term life insurance is not used for estate planning or charitable-giving purposes. All premiums cover the cost of underwriting insurance. As a result, term life premiums are typically lower than permanent life insurance premiums.