With
life insurance, it's usually good to
start at the beginning and online, that
usually points to a definition. We want
to go a little deeper than the standard
two line Webster's definition but the
goal is the game...a basic understanding
of what term life means. So let's get
started. We're going to assume that
you're okay with the pronunciation of
'term life' and start from there.
So
what is term life? Let's go one step
down from there...what is life
(insurance)? Life insurance is a way of
protecting person, people, or entities
that have a financial reliance on a
person in the event that the latter
person passes away. That's the simplest
break-down but of course, it reduces the
myriad uses and needs that drive this
reliance. The trigger for life
insurance is the death of the insured
and this is very important as it
differentiates life insurance from
disability insurance. For example, if a
person has a stroke and is unable to
work, that is not a trigger for life
insurance benefits. Only death of the
insured can result in benefits being
paid by the insurance company. A life
insurance policy is a contract between a
person (the insured) and typically a
company (the life insurance carrier) in
which the insured promises to pay a
given amount of money (the premium) in
order to receive a certain benefit if
triggered (passing away). We've not
take the basic concept of life insurance
and formalized it between a person and a
company via a contract (life insurance
policy). So far, so good.
Let's
take the basic definition of life
insurance and narrow it a bit. There
are two basic ways to address the above
risk between a person and the insuring
company and the conceptual frame-works
couldn't be more different. Term life
insurance operates under the idea of
providing the above protection that life
insurance intends for a fixed period of
time. That's it. So here's the
definition of term life insurance.
Term
life insurance is a way of protecting a
person, people, or entities that have a
financial reliance on a person for a
fixed period of time in the event the
latter person passes away. So, what
does this mean to the two parties
involved. First, the benefit to the
insurance company is that they have a
finite window of risk to insure. They
can look at their past and current
policies (along with mountains of other
mortality data) to determine what to
charge for a given risk assessment. The
benefit to the insured is that the cost
of insuring a fixed period of time is
much less than the alternative. What is
the alternative? Essentially, it's
applying the same life insurance
definition above and taking out the
"fixed period of time". It generally
falls under the umbrella of "whole life"
although there are many nuanced versions
of how to do this. It will be much more
expensive than term life but there will
also be a guaranteed death benefit.
We've addressed the many differences
(pro's and con's) to these two types of
life insurance (term or whole)
throughout many articles but the
definition of life insurance and more
specifically, term life insurance
remains the same.
Hopefully, by
defining term life insurance, we
provided a jump off spot to dig deeper
into the many variables and
peculiarities to term life insurance
articles that we've provided on the
etermlifeinsurancequote.com
We'll then define that as a success! |