Term life insurance doesn't build any cash value, which makes it an original type of life insurance and considered pure insurance protection. Unlike whole life insurance, term life insurance is only for a short time and only covers a certain time in a person's life. A beneficiary will only get benefits if the insured person dies within that time frame.
Most of the time, term life insurance is the least expensive way to buy a death benefit package per dollar. This is because the term will end and the insurance company will no longer have to pay out.
With the Theory of Decreasing Responsibility in mind, it is suggested that people buy term life insurance. The Decreasing Responsibility Theory assumes that the person or people who are insured know and understand that all financial obligations are temporary and that they should buy insurance to cover these obligations.
Buying term life insurance once a year is the easiest and simplest way to do it. The amount of the premium is just the expected chance that the person will die within that time period plus a few extra fees, like a cost and profit component. Since insurance companies can choose who to cover, and the chance that someone they cover will die in the next year is very low, most people don't buy one-year terms. An annual policy is also not a good way to save money. A lot of people choose terms that can be renewed every year (ART). In ART, a premium is paid for one year of coverage. After that, the coverage is guaranteed to last for X years, which could be anywhere from ten to twenty years or more, depending on what the insured person chooses. Even though the insured will have to pay a higher premium, the benefits are more likely to be paid.
A level term is a common type of term life insurance that can be renewed every year and has a fixed premium for X years. Usually, a term lasts 10, 15, 20, or 30 years. A level term has a higher premium for a longer period of time because people get more expensive to insure as they get older, and their ages are averaged into the premium.
Even though regular life insurance is more likely to pay out in the end, many people don't like it for one reason or another. Term life insurance is a great choice for these kinds of people. People can get life insurance for a certain amount of time, and it can be renewed annually or for longer periods.
