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How Do Term Life Insurance Policies Work

How Do Term Life Insurance Policies Work Finance

When you are skeptical or undecided about investing in a term life insurance policy, understand what it entails and list out its advantages to help you make a wise decision.

For a term life insurance to be profitable, the insured person must be dead before the end of the term of the policy, so the beneficiaries can receive the policy amount or the death benefit. If the insured person lives through the specified term of the insurance policy, then no payment is made out by the insurer. Also, the insurance policy terminates automatically at the end of the term mentioned in the policy document. If you want to renew it, you must make an effort to change the term or convert it into a permanent life insurance policy.

For both short term and long term needs of the family of the insured, term life insurance is very helpful. College fees or mortgage payments, for example, are short-term expenses that could be met with the payout from the term life policy in the event something happens to the primary earner during the term of the policy period. And, being affordable and uncomplicated, it is a feasible option as a temporary life insurance policy.

However, term life insurance is not a tax-free saving. And, with every renewal, the premium tends to increase and ultimately becomes redundant if it is not valid until the insured person’s death.

The choice to convert a term life insurance into a traditional permanent insurance policy is appealing to many. Although, it must be noted that there are stipulations to be followed. Like for example, the original specifications of the insurance policy holds good, even if there is a change in the insured person’s health condition, and the premium for the new policy is based on the insured person’s age at the time of conversion.

Show that you care for your loved ones, even after your death. Provide for a term life insurance for your dependents.


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