Actually the term life insurance is the basis of all other life insurances. The main difference of term life insurance from whole life insurance, variable universal life insurance and universal life insurance is that it does not build any cash value.
Since term life insurance is only valid for certain fixed period, the policy is called term life insurance. After the fixed period the insurance policy is expired. But if insured person wants to continue with their term life insurance then they can do by paying the upgraded premium every year.
Term life insurance covers the life of the insurer. The beneficiary of insurer will get the insurance amount if the insurer died during the term. Term life insurance is the cheapest in terms of premium value
Function of term insurance
The term life insurance functions like other type of insurance. To understand the function of term life insurance let’s take an example of home owner insurance that covers the earthquake. Now in the event of earthquake, if the insured house is damaged, then insurance company will pay the compensation according to the policy. But if there is no earthquake during the period of insurance then the policy holder has no right to claim their premium money back.
Similarly term life insurance premium is gone if the person is still alive. That’s why the premium of term life insurance is very low compare to the other life insurances. It is basically suitable for old person who are not eligible for other life insurances. Like your car insurance, term life insurance is only risk protection.
Uses of term life insurance
The term life insurance is mainly used to cover various monetary responsibilities of the insurer like mortgages, various debts, dependent care and dependent’s education.
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