Term Life Insurance

Term life insurance, as the name suggests, provides life insurance only for a limited time. It can be compared to an automobile insurance policy in that, the insured receives protection against a loss or claim while the policy is in-force. If, during the time of coverage, no accident happens, no benefits are paid under the policy and at the end of the period of coverage, there is no refund of premiums paid.

Similarly, with term life insurance, if the insured does not pass away during the period in which the policy is in-force, no benefits are paid out to the designated beneficiaries and, at the end of the period of coverage, there is no refund of premiums paid.

Although term life insurance does not provide the cash value (accumulation potential) feature found with most permanent policies, it provides guaranteed protection, coverage and premiums throughout the life of the policy and is the best option in several types of sales.

Some common uses for term life insurance include:

Family Protection – To provide funds to support a surviving spouse and/or minor children in the case of the insured’s death.

Mortgage Protection – Tax-free proceeds from a term life policy in the case of the insured’s death can help pay-off the mortgage on the home of the insured’s beneficiaries.

Educational Expenses – A term life insurance policy may be used to cover the cost of a child’s college education in the case of the insured’s death.

Final Expenses – Funds can also be used to cover final expenses at the time of the insured’s death, such as medical bills, burial cost or other estate expenses.

Key-Person Insurance – Provides financial protection for a company or small business in the case of the death of one of its key employees. In this type of sale, the company purchases a policy on one of its key employees and the company is named as the beneficiary.

Buy-Sell Agreements and Business Succession Planning – Term insurance is a useful way to fund a cross-purchase buy-sell agreement, particularly in cases in which one owner is significantly younger than another.