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How Term Life Insurance Works
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This is life insurance that provides coverage for a fixed premium rate but for a limited period of time that is relevant to the insurance seeker. After that period expires, coverage at the prior rate of premiums is not guaranteed. The client must either forgo coverage on his own or obtain further coverage but with different payment arrangements. If the person insured by term life insurance dies then the death benefit is paid to the beneficiary. This type of insurance is suitable for those seeking to get life insurance at an affordable rate because the term life insurance quotes are reasonable. This type of life insurance is the original form of life insurance and can be contrasted to other forms.
Other forms of life insurance are the permanent life insurance such as whole life, universal life and variable universal life. These other forms guarantee coverage at fixed premiums for the whole lifetime of the covered individual. Since term life insurance is pure death benefit, it works by providing coverage of financial responsibilities for the insured individual and his beneficiaries. Such responsibilities include but not restricted to university education, mortgages, consumer debt, funeral costs and dependent care. All these responsibilities can be covered for an individual when he dies at reasonable term life insurance quotes. This type of insurance is preferred by many people over permanent life insurance mainly because of its affordability depending on the length of the term covered. Unlike permanent life insurance, this insurance does not charge higher for those with health issues or those who are at risk to be unhealthy for example chain smokers.
The simplest form of term life insurance is for a period of one year. This is the least amount of period that an individual can apply for cover. The death benefit will be paid by the insurance company if the person insured dies during the one year period. The disadvantage with this form of insurance is that no cover will be paid if the insured dies a day after the one year period. The term life insurance quotes paid by the individual taking cover will be based in the probability of the insured dying within the one year period. Purchase of coverage for one year is however rare because the likelihood of someone dying in the next one year is low. Just like other forms of insurance, renewal is required for this type of insurance. The main difficulty in renewing the cover for another term is providing proof of insurability.
Providing proof of insurability is difficult because the future is uncertain. Anything could happen in the period between your last term and the time you are seeking renewal of the term life insurance. For example you could acquire a terminal illness within that period but not die until the term expires. With this kind of illness, if the term expires then the individual will likely be uninsurable and would be unable to renew the policy or purchase a new one. Some insurance offer a feature called guaranteed reinsurability that does not require proof of insurability but this is offered at higher term life insurance quotes.
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