What is Term Life Insurance?

By Compuquotes Team on March 26th, 2008

Almost everyone knows how important it is to invest in life insurance to protect your loved ones once you are gone, but the purchasing of that insurance might prove to be an intimidating experience to some people. If you are unsure of what to buy, you might, out of fear, choose not to buy anything rather than to make the wrong choice or the wrong investment. This can be the worst decision of all, though, and could seriously hurt your family should something happen to you.

That is why today we are taking a look at one kind of insurance: term life insurance. So what is it? Term life insurance is an insurance policy that is effective for a stated period of time, which can range in length from as few as five years to as many as thirty or more depending on the individual policy. Term life insurance is designed as a temporary solution to life insurance.

If you are beginning to have children, then you might want to think about a twenty year policy to help protect your family through the years when your children will be young and vulnerable. This means that if you die within the twenty years, your spouse will have the finances that he or she needs to take care of the children and continue to make a living without your income or aid.

This is a great means of protecting your family, and can be a great supplement to a much smaller whole life insurance policy. Once your children move out of the house, your spouse will not need as much money and as much coverage to live their life, and so the policy could be renewed at a smaller rate or simply allowed to expire at that time.

Another great use for term life insurance is as a buffer when taking on new debt. If your spouse can reasonably support him or herself without you, then you might not want to bother with insurance (although it is still a good idea), however if you are adding the burden of something like a new car payment to the regular expenses, then you might want to make sure that you have extra coverage until the debt is paid off and your spouse could again assume the financial burden if needed. This is what shorter terms such as five year policies are good for.

Term life insurance is also good for changing with the stages of your life, from young adulthood where a large policy might benefit a struggling spouse to parenthood when you might need even more coverage for your children to retirement, where you are living on less money and need less to survive.

Term life insurance also has smaller premiums, typically, than whole life insurance, making it easier to afford initially and easier to deal with. If any of these reasons fit your current life stage, then term life insurance might be the thing you are looking for. If not, perhaps you should consider a whole life insurance policy.

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