A lot of people ask the question, What is term life insurance? Term life insurance provides people with coverage at a specific fixed rate of monthly or annual payments for a certain amount of time. When thinking about life insurance or discussing the subject with loved ones, there are four things you should keep in consideration. There are two different types of term life insurance, short term and full term life insurance. Also, remember to thoroughly check the coverage that different insurance companies offer. The final thing to look at in the different policies is whether there is a rider offered along with basic policy.
Short Term Life Insurance
Short term life insurance is a contract that provides the beneficiaries death and terminal illness coverage for a limited amount of time. Once the policy reaches its stated expiration date or if a lapse in premium payments occurs, the coverage will then stop. IF the insured person passes away or is diagnosed with a terminal illness while the policy is active, the chosen beneficiaries will be granted a lump sum benefit payment. Most of the time, insurers will offer coverage periods of around 5, 10 or 15 years. These plans are designed to provide affordable and simple coverage.
Long Term Life Insurance
Long term life insurance is different than short term life insurance only because of the fact that it lasts a person’s entire life. The long term life insurance can also be called cash value life insurance or permanent insurance. This is the only type of policy that provides both living and death benefits. Full term life insurance policies require the insured person to make payments on premiums that exceed term life premiums. The extra premium that may be collected is then set aside. This cash is called the cash value, or cash reserve. This extra money can then be used anytime, for any purpose.
There is a large variety of different life insurance plans that offer suitable options for different individuals, retirees and families. It is important to remember that not all plans offer the same coverage. When a person understands the difference between coverage and policy terms grants the individuals an opportunity to make more informed decisions.
The riders is a provision of certain insurance policies that can be purchased separately from the main policy. A rider also provides additional benefits, but at an additional cost. A standard policy would usually leave some room for customization, beyond just choosing coverage amounts and deductibles. Riders help policyholders to create insurance products that can meet a person’s specific needs.
It is always a good idea to review your term life insurance policy, just to make sure that you have exactly the right coverage that you need for your current situation. If your coverage was fine five years, that does not mean it will work for your needs today.