Understanding 'Who' and 'Why' of Term Life Insurance

Over the last 11 years, I have been working as an actuary within the insurance industry. A topic that I see every day that is simple in it's nature, but seems to be the one of the hardest for the client to understand, is term life insurance. A term life insurance policy is one that ensures coverage of benefits for a fixed amount of time. During this time, which is called a term, the client will pay a fixed premium for the duration of the term. The fixed range of time varies depending on the client's need for coverage. During the term the client will be insured and the beneficiary of the policy will have rights to the death benefits of the insured. Once the term of the policy has expired, all rights to death benefits are considered to be null and void.

Who Should Have Term Life Insurance

Term life insurance has many benefits for families that can help secure their future in the event of a loss of income. A family with a mortgage that has a loss of an income contributor can benefit greatly from the policy payout. A short-term life insurance policy can also provide security to a family during early childhood raising years and through a child's college years. Another group that should have coverage under a term life insurance policy are business owners. A term life insurance policy could protect a business in the event of an owner's death. A term life policy can ensure business continuation by providing funds to cover business expenses in the event of an owner's death.

Considerations When Choosing A Term Insurance Policy

When choosing a term life insurance policy you will want to carefully consider your duration of need for coverage. This option allows you the ability to customize your policy coverage to reduce individual and group risks. Another consideration to look at when buying a term life insurance policy is what company are you buying the policy from. Make sure you research any insurance company before you purchase any policy. Independence rating services such as Standard & Poor's provide comprehensive information and rating on most American insurance providers.

Important Term Life Insurance Policy Aspects

There are several key aspects to consider when choosing a term life insurance policy. One of these aspects is the amount of dollar coverage needed. Term policies typically start at around 100,000 dollars and can be see as high 10,000,000. You will want to analyze your own individual and group needs in order to determine the proper coverage amount. Another aspect of a term life insurance policy to consider is what is called the return of premium clause. In this aspect of a term life insurance policy you will pay a fixed amount premium for the duration of the policy. However at the end of the policy term you will receive all of you premium payment back.