Knowing When You Need Term Life Insurance?

Answer 1

For most people, term life insurance is the only life insurance they need. To start, the basic definition of term life insurance is that it is a policy covering the life of the insured for a period of time. If the insured dies within the term of the insurance, that is within the period of time defined by the policy, the insurance company pays the face amount of the policy to the named beneficiary or beneficiaries.

Whole life insurance on the other hand combines the term policy with an investment component, which could be in bonds, money markets, or stocks. The whole life policy builds cash value that you can borrow against, but most people don't need whole life insurance and we'll tell you why.

Term life insurance can be quite affordable for people in good health up to about age 50, and it's relatively easy to get without a medical physical exam to prove your good health. A term policy is available for those high earning years when your income will be crucial to those you leave behind. In most cases, a term policy is necessary for parents whose children would be in dire straits without the income of their parents. Depending on the work status of your spouse, a term policy may be necessary to provide their income as well.

Term life insurance does not build up a cash value, but it's very inexpensive for the relative value it offers. It applies only for the term of the policy – as long as premiums are made – and when the term is finished, the policy goes away. It is, by definition, a temporary policy and specifically used to cover those times of your life when your dependents are most dependent on you and your income. Term life insurance usually comes with attractive fixed premiums and high payouts for non smoking adults between 20 and 49, so it's a good way to ensure that those you leave behind won't fall on hard times if you die and leave them without a steady income.