Term Life Insurance

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Term Life Insurance
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What is 'Term Life Insurance'

• Term insurance is a policy with a set duration
  limit on the coverage period. Once the policy is
  expired, it is up to the policy owner to decide
  whether to renew the term life insurance policy
  or to let the coverage end. This type of
  insurance policy contrasts with permanent life
  insurance, in which duration extends until the
  policy owner reaches 100 years of age (i.e.
  death).

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BREAKING DOWN 'Term Life Insurance'

• These types of policies provide a stated benefit
  upon the death of the policy owner, provided that
  the death occurs within a specific time period.
  However, the policy does not provide any returns
  beyond the stated benefit, unlike permanent life
  insurance policies, which have a savings
  component that can be used for wealth
  accumulation.

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• Term life insurance is also known as pure life
  insurance because its only purpose is to insure
  individuals against the loss of life. Premiums
  for term life insurance are based solely on a
  persons age, health and the life insurers
  determination of life expectancy. If the person
  dies within the specified term, the insurer pays
  a death benefit to the designated beneficiary. If
  the term expires before death, no death benefit.
  Policyholders may be able renew a term policy at
  its expiration, but their premiums will be based
  on their attained age.

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• Term insurance is best suited for people who know
  for certain their need for life insurance
  coverage will be temporary in other words, they
  feel their surviving family members will no
  longer have a need for the extra protection term
  life insurance provides or that they will have
  accumulated enough liquid assets to self-insure.

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Types of Term Life Insurance

• Level Term Level term life insurance provides
  the insured with coverage for a specified period
  of time, typically 10, 15, 20, 25 or 30 years.
  The premium is calculated based on the age and
  health of the insured. The insurer levels out the
  premium payments by charging more at the
  beginning of the policy than mortality costs
  require, so the premium payments are fixed and
  guaranteed for the term.

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• Yearly Renewable Term A yearly renewable term
  (YRT) policy has no specified term and is
  renewable every year without evidence of
  insurability. The premiums on a YRT policy start
  off low and increase each year because they are
  based on the insureds attained age. Although
  there is no specified term with a YRT policy,
  premiums can become prohibitively expense for
  those at later ages, making it difficult to
  maintain.

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• Deceasing Term A decreasing term policy features
  a death benefit that declines each year according
  to a predetermined schedule. The insured pays a
  fixed, level premium for the duration to the
  policy. Decreasing term policies are often used
  in concert with a mortgage loan to match the
  coverage with the declining principal of the
  loan.

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Sourcehttp//www.investopedia.com/terms/t/termlif
e.asp