The Benefit of Term Life Insurance

by Contributing Writer

Overview

Term life insurance protects you from financial loss in the event of premature death. Purchasers of term life insurance specify the coverage amount and length of coverage, which will depend on their individual family and financial situation.
Identification

Term life insurance pays the face value of the policy to a named beneficiary upon the death of the insured. Term life insurance purchasers pay a monthly premium based on the amount of coverage and the length of the policy.

Function

According to State Farm Insurance, life insurance is protection against financial loss resulting from death. A person's ability to earn an income is a significant asset and in the event of an unexpected or premature death, life insurance replaces that lost income.
Benefits

After a premature death, life insurance could be used to maintain a family's standard of living, pay final expenses, such as funeral costs, pay off debts, send a child to college or establish an emergency fund.
Types

According to AIG Inc., there are five main types of term life insurance: renewable, level, decreasing, convertible and return of premium. As the most common form of term life insurance, level term policies provide a fixed amount of coverage for a set time period.
Considerations

The amount of life insurance a person needs depends on their financial situation, including debts owed and current investments. According to DaveRamsey.com, a person should purchase a term life insurance policy equal to eight to 10 times their annual income. Term life insurance rates vary widely, and purchasers should compare rates across several companies.