What is Term Life Insurance?

Term life insurance is a life insurance policy that covers the person assigned to the policy for the period of time specified by the policy in the event of death during that period of time.  There are generally three levels for this coverage; 5 year, 10 year, and 20 year.  The amount of coverage can range from $5,000 to more than a million.  Generally, the amount of coverage ranges from $5,000 to $100,000.

The policy holder assigns a beneficiary, to whom the money is assigned in the event of death during the period of time specified by the policy.

An important aspect to consider, and ask about, when reviewing your term life policy is a "return of premium rider."  A rider is an amendment to your insurance policy.  This allows you, as the policy holder, to receive a return of the premiums you paid in the event you do not die during the period specified by the policy.  While this can be a desirable feature, keep in mind that adding this rider to your policy will increase your premium.

Two options for term policies are renewable term and convertible term.  In a renewable term the policy can be renewed at the option of the policy owner at the end of the policy term WITHOUT evidence of insurability (medical exam).  For a convertible term, the policy can be converted to a permanent life policy without evidence of insurability.  A deadline is usually specified for the conversion option, such as 5 years.

Why Is Term Life Insurance Important?

One of the primary reasons a person takes out a term life insurance policy is to cover funeral expenses, which can be costly.  

In addition to this, many of us have families to raise and their well-being relies on our income.  Term life insurance is a way to make sure that your family can sustain itself in the event of death.  Another considerable aspect is the cost of education and the financial burden this can cause if we are to pass away before our children have an opportunity to continue educational pursuits.