What is Term Life Insurance? – Some Quick Facts

If you have been thinking that it is time you made an investment keeping the needs of your family in mind in case of your death you must have come across term life insurance plans. And if you have been wondering what is term life insurance plans this article will dispel all your doubts.  Term life insurance is a kind of insurance coverage that you can buy, which will provide monetary benefits to your family in the situation of your untimely death.

This happens against a fixed premium that you agree to pay the company every month until a stipulated period. With regards to what is term life insurance know that if death of the policy owner happens before the end of the insurance term the nominee set by the policy owner gets the insured amount while if the insured person outlives the stipulated time for which he is insured then he or his family get no death  benefits.

What is Term Life Insurance and What Are the Different Types?

There are three basic types of term life insurance:  Level term insurance, Decreasing term insurance and Annual renewable term insurance

In level term insurance policies, what is term life insurance is answered by the fact that the death benefit protection amount that your purchase does not change for the whole term of the insurance policy. The premiums however that you are required to pay for this fixed term to get the specified protection amount may remain the same throughout the entire period or may remain level for a specific period and then increase. For instance if you have a policy that is scheduled to mature in 2040, you may have to pay a certain amount as premium till 2020 and pay a higher premium for the next twenty years.

Decreasing term insurance coverage is another type of protection plan that you may purchase where the premium you pay throughout the stipulated period remains the same, however the protection amount you purchased initially will decrease over time. This kind of policy is beneficial only to those who have financial obligations that are bound to reduce in the forthcoming years, like a mortgage, or a loan etc. In terms of what is term life insurance, know that this is the least favorite and not so often recommended by financial planners. The only advantage of this plan is that the premiums to be paid are relatively low.

Annual renewable term insurance policies are another answer to what is term life insurance in which the amount of protection you get as death benefits remain the same. However the premium paid increases every year. These policies are usually issued for a period of a year and can be renewed at the end of the year if the insured person is still alive.

You can continue doing this up to a certain age limit as specified by the insurance company, without having to again prove that the insurer is in good health conditions. For instance in New York City such plans can be renewed up to the age of 80. While other such renewable term life insurance plans can be bought for a fixed period say a year, and renewed after the specified time is over, though at a higher rate of premium.