Define Term Life Insurance
Define Term Life Insurance. Definition, advantages of term life insurance, and whether you should get them at all.
Term Life Insurance Definition
What is term life insurance? Term Life Insurance policies are fixed term policies that offer only death protection for a fixed amount of time.
Advantages of Term Life Insurance
Term Life Insurance is highly affordable, and thus also one of the most popular types of insurance policies.
Term Life Insurance Premiums
Term life Insurance policies have low and highly affordable premiums, largely because these policies carry no cash value and only offer protection for a limited amount of time, usually up to 30 years.
Nonetheless, term premiums increases with age, as the probability of death increases. New term insurance policies become extremely expensive after the age of 65, so it is best to get them in your mid-life, if you need to get them in the first place.
Term Life Insurance Benefits
Define term life insurance benefits: this type of insurance covers only a death benefit; it pays a fixed lump sum to a designated beneficiary should you pass away. This type of policy protects your spouse and your children by providing money that can be used to replace your salary, thus making up for the loss in family income.
However, the drawback of term life insurance is that it does not have a wealth accumulation component. That means that for our purposes of accumulating wealth, term life insurance is only of limited importance.
Who should get Term Life Insurance?
Term life insurance is especially important for families that are solely dependant on one breadwinner for survival. This is even more the case if your family tends to live from paycheck to paycheck, with very low excess cash flow. In these circumstances, the need for death protection of the breadwinner is high.
Beyond Term Life Insurance Definitions
For even more on this, read about the perennial debate: Term Life Insurance vs Whole Life Insurance.