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Definition of Term Life

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A Definition of Term Life

Let's first understand what it really is

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!



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