Term Insurance is the lowest cost life insurance product available. When you buy term life, you are purchasing “pure” insurance, which typically does not build up cash value or a savings feature.
Term life insurance provides for coverage during a specific time period 5, 10, 15 or 20 Years. There is also Term to 100.
The premium amount is fixed for the period of years and increases at each new term. Term life insurance only provides for coverage in the event of death during the coverage period.
The policy may have provisions that vary the amount of death benefit, permit the term of the coverage to be extended, or permit the policy to be converted into a permanent form of coverage. If the insured dies within the “term period,” the predetermined death benefit will be paid to the beneficiaries
Term insurance is bought by millions of people for a number of reasons. Families use Term for security. In case the insured passes away, your Term policy insures there will be money to use to pay for your home, college, outstanding loans and other major expenses. Small Business Owners use Term insurance as low cost debt protection to cover notes, lease obligations, business real estate mortgages and other expenses.
Business Partnerships often use Term Insurance to buy out partners in the event of their death. For example, the deceased’s beneficiary gets the insurance proceeds and the ownership in the company is then transferred to the remaining partner(s).
Corporations use Term as stock purchase redemptions. In this case, the corporation gets the insurance proceeds and buys back the stock from the deceased’s beneficiary, normally the surviving spouse or estate. For businesses, Term Insurance can provide real benefits for the beneficiaries with no negative cash flow impact on the company.
Term life is a good choice for many people, but NOT for the following reasons:
- To fund expected federal and/or provincial estate tax obligations.
- To fund an Irrevocable Life Insurance Trust.
- To fund trusts for the purpose of providing an estate.
These reasons would be better served with Permanent Life Insurance, either whole life or Universal Life
Braun Financial Services is able to assist you with all your life insurance questions and is able to offer a variety of insurance products. For additional information and insurance quotes, please contact us.