Term life insurance is, as its name might lead you to expect, a type of life insurance policy. Essentially, it guarantees that your payments will be a certain fixed rate for a certain period of time. This is the “term.” After that, however, your payments could change and you would either have to simply meet them or change your policy.
It is a life insurance policy - in that it does not pay out for injury or accident not resulting in death. It only pays out if you die. It will pay the money out to the person you named as the beneficiary in almost all cases, unless, of course, there are reasonable grounds on which to dispute it.
There are, as with many all insurance policies, circumstances in which the policies will not pay out even in the event of the policy holder’s death. For example, if the premiums are not up to date or there has been some sort of breach of the policy terms. Almost invariably, term life insurance policies do not pay out in cases of suicide.
However, what they are useful for is situations where the policy holder fears that, in the case of his or her death, there would be no means of covering any expenses. Such expenses include debts held by the policy holder, mortgages, the care of any dependents the policy holder may have and, of course, funeral expenses.
Term life insurance policies often end up being much less expensive than a permanent life insurance policy would and, as such, many people use them as a “bridge.” An example of this could be someone approaching retirement age, who is concerned that their untimely death might leave their family with a massive financial burden, but who believes that when they reach retirement, they would have enough money to cover said expenses anyway. They may use term life insurance just until they reach that point.
Find out more about term life insurance.
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