Temporary Life Insurance (Term Life Insurance)

Term life insurance (term assurance) provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Term insurance premiums are typically low because both the insurer and the policy owner agree that the death of the insured is unlikely during the term of coverage.

The three key factors to be considered in term insurance are: face amount (protection or death benefit), premium to be paid (cost to the insured), and length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. A common type of term is called annual renewable term. It is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.

A policy holder insures his life for a specified term. If he dies before that specified term is up, his estate or named beneficiary receive a payout. If he does not die before the term is up, he receives nothing. After a number of court judgments against the industry, payouts do occur on death by suicide. Check the policy for details.