So what’s the big deal about term life insurance? The answer may surprise you. It’s not that term insurance is so great; in fact, it’s more that the insurance world has grown more and more complicated as new alternatives to the old styles of life insurance have appeared on the market. There used to be a large debate (which, incidentally, still continues to the present) between two basic types of insurance for life: term (temporary) and permanent (life-long).
Term life protection basically covers you for a certain fixed period of time that you determine (for example, 30 years). The policy will pay your family a death benefit only if you die during that time. Also, there is no accumulation of cash value on the policy, which makes term different from straight (permanent) life insurance.Some insurance policies allow you to become an investor and share in financial gains from the insurance company’s investments. However, term cuts you off from any ability to invest in anything: once the money is paid, it’s gone forever, unless you die during the time period specified by the policy.
Term policies for life insurance customers can come in varied lengths of time: 5, 10, 20 and 30 years are some of the most common policy lengths.
Again, remember that if you are still alive when the life insurance policy ends, you don’t get any payout for a term plan. Of course, this is still the cheapest kind of life insurance there is, so that’s an advantage you should consider carefully. The bottom line: If you are looking for the cheapest kind of life insurance and are still young, this is probably the best type of insurance for you.
