Term life insurance is a type of insurance policy that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After the period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiaries.
Related Questions
1. How does term life insurance work?
The insured makes regular payments, known as premiums, to the insurance company. In return, the insurer promises to pay a set amount to the beneficiaries upon the insured’s death, as long as it occurs within the designated term.
2. What happens when the term of the life insurance ends?
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When the term ends, the individual may either pay increased premiums to continue the coverage, convert the policy into permanent insurance, or let the policy end.
3. What are the main types of term life insurance?
There are mainly three types: level term where the death benefit stays the same throughout the term; decreasing term where the death benefit decreases, usually every year; and increasing term where the death benefit increases over the course of the term.
4. Is term life insurance a good idea?
Yes, it can be especially beneficial for those who have a temporary need for coverage, for example, parents with young children. It can provide peace of mind that your dependents will be financially secure if you were to unexpectedly pass away during the term.
5. Can a term life insurance policy be changed to a whole life insurance policy?
Yes, most term life insurance policies come with a conversion feature that allows policyholders to convert their term policy into a whole life insurance policy without a medical exam. The rates will be based on the insured’s age at the time of the conversion.