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, he or she buys coverage for a specific period and pays a specific price for that coverage.
If the policyholder dies during that time, his or her beneficiaries receive the benefit from the policy. If he or she outlives the term of the policy, it is no longer in effect. The person would have to reapply to receive any future benefit.
There are important differences between term vs. permanent life insurance. Unlike permanent insurance, term insurance only pays a death benefit. 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.
Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
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.
We can help you assess your insurance needs before and in retirement at Wealth Management Group. Your insurance needs could change as you age, and there are a number of insurance and financial products available. Click here to sign up for a complimentary financial review so that we can learn more about your unique financial planning needs.