Term insurance is the simplest form of life insurance. It provides temporary life insurance protection on a limited budget. Here’s how it works:
When a policyholder buys term insurance, they buy coverage for a specific period of time and pay a specific price for that coverage.
If the policyholder dies during that time, their beneficiaries receive the benefit from the policy. If they outlive the term of the policy, it is no longer in effect. The person would have to reapply to receive any further benefit.
Unlike permanent insurance, term insurance only pays. It does not accumulate a cash value. That’s one of the reasons term insurance tends to be less expensive than permanent insurance.
Many find term life insurance useful for covering specific financial responsibilities if they were to die unexpectedly. Term life insurance is often used to provide funds to cover:
Dependent care
College education for dependents
Would term life insurance be the best coverage for you and your family? That depends on your unique goals, needs, and circumstances. You may want to carefully examine the pros and cons of each type of life insurance before deciding what type of policy may be the best fit for you.
Life insurance is not insured by the FDIC (Federal Deposit Insurance Corporation). It is not insured by any federal government agency or bank or savings association.