Term life insurance is the simplest and cheapest form of life insurance. The insurance is for a fixed or temporary period of time. However, unlike whole life insurance there is no savings or end of term benefit. Term life insurance does not build any cash value.
In the event of death of the insured, benefits are paid to the beneficiary. In the event the insured outlives the term, he does not receive any money.
The insurance premium is lower than other types of life insurance. In case of annual renewable term insurance, the insurance is renewable up to a fixed period, but the premiums increase annually.
Another form of term life insurance is the guaranteed level premium life term insurance. Level premium life term insurance has level premium payments for the entire term. Renewal of the insurance increases the premium for the next term. Typically the term options could either be for 5, 10, 20 or 30 years.
Term life insurance is especially useful for loan coverage. Term life insurance can also cover other financial obligations like funeral costs, mortgages, business loans for a sole proprietor, consumer debts, etc. The term insurance benefits would pay for the loan balance in case of the insured’s death.
Because it is cheap, young adults can also use term insurance to ensure higher insurance coverage on a budget.
Term life insurance as a cheap life insurance coverage is an affordable form of life insurance which can be useful for young adults or for specific financial liabilities.