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What Is Temporary Life Insurance?

What Is Temporary Life Insurance?
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Temporary life insurance is more commonly referred to as term insurance in the life insurance industry

. Term life insurance is temporary because it does not last for the average person's total life span. Rather it is taken out for a set period of time, referred to as the term, and the insurance benefits are only valid during that period of time. At the end of the term, the benefits lapse and the policy ends. Only if the insured person dies during the term are the benefits of the policy realized. On the surface, this may seem like a fairly pointless form of insurance as most people generally expect to live more than just an additional 10 or 20 years. However, term insurance was created because there was a very real need for it in the life insurance market. Let's look at term life insurance in some more detail.

When Would You Consider Temporary Life Insurance?

Most often term life insurance is linked to financial responsibility. For example, many banks and financial institutions insist that a temporary life insurance policy forms part of the mortgage loan agreement. This ensures that the financial institution will receive their full loan amount back in the event that loan recipient dies before it is fully repaid. The benefit is not only for the financial institution. The beneficiaries of the policy, in other words the insured person's dependents, will also be left more secure by the agreement. They will have the knowledge that they still have a home in which to live without worrying about how they will make the mortgage payments.

Term life insurance might also be considered when a person has additional financial responsibilities. For example, if you have children attending a private school where the tuition is costly, or if you have more than one child attending college and you have to provide for their tuition. You may be able to comfortably do so while you are alive and physically able to work. However, what would happen to your children's education if you were no longer around to provide for them? A temporary life insurance policy can cover the risk of these additional expenses in the event of your death.

What Are the Benefits of Temporary Life Insurance?

Life insurance is costly and not really considered a financial investment. Rather it is something that most people have to take out in order to protect their families and dependents. If you were to take out whole life insurance to cover additional short-term financial responsibilities such as a mortgage or education then the premiums would be unaffordable for most people. For this reason, term or temporary life insurance was created as a more affordable option. Because the life insurance policy is just for a set term, the risk is reduced and therefore the premiums can be brought down. This makes life insurance affordable for people who need it most. People who are insured under temporary life insurance policies can have the peace of mind that if something were to happen to them, their dependents would still be taken care of.

Who Would Benefit from Temporary Life Insurance?

Term life insurance is not only for homeowners and families. It also offers a more affordable life insurance option to the average person. Some term life insurance policies allow for renewal with just a small penalty payable. This means that when the policy lapses, they can extend the term. Older people who do not have a life expectancy of more than 20 years may also benefit from the more affordable premiums offered by a term life insurance policy. However, you need to keep in mind that the older you are, the greater the risk of death. As the risk increases, so does the value of the premium payable. Life insurance should never be seen as an investment. It is simply a mechanism to provide for dependents when the insured person passes away.

What Are the Drawbacks of Temporary Life Insurance?

The greatest drawback of term life insurance is that the policy only lasts for a set term. For the duration of the term, you will pay premiums. If, at the end of the term, you are still alive then the policy simply lapses. In other words, you have paid a lot of money into a policy and your dependents don't get anything out of it. As with all insurance policies, it is the case of risk versus cost that people need to evaluate.

by: Frank KasimovAbout the Author:For consumers looking for insurance online and where to get the best insurance quotes possible, look no further than 2insure4less.com. Whether it is auto insurance, home insurance, health insurance, life insurance, cancer insurance, disability insurance, business insurance quotes or burial insurance, 2insure4less has helped countless consumers find insurance online.


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