What Exactly is Term Life Insurance?
Term life insurance is the simplest and the cheapest form of life insurance. You decide the amount of money you want your dependents to get in the event of your demise. Term life insurance pays a tax-free lump sum in the event of death within a specified period of your choice. This period, which you decide on at the time of purchase of the life insurance policy, is known as the ?term?. Fixed monthly or annual premiums are paid for the duration of the term. A whole bunch of variables, such as your age, gender, state of health, previous ill health, the term you require, determines how much the premium will be. For example, a 32-year-old non-smoking male requiring $190,000 of cover for 25 years will pay around $20 a month. And the premiums are fixed for the whole 25-year term. You will be covered for as long as you pay the monthly premiums. If you stop paying the premiums, the policy terminates. With this form of life insurance, there?s no investment element. If you get to the end of the term and haven?t claimed, you forfeit all the premiums you?ve paid. But the term life insurance you had was cheap and the premiums remained constant.