A Closer Look at the Term Life Insurance Definition
A number of terms regarding different insurance policies are commonly used today. In fact, the differences between the terms are often used interchangeably that one has to know exactly what makes the disparity. The term life insurance definition is very concise in nature but offers a noticeable dissimilarity from that of its counterparts.
Term insurance definition states that it is the simplest policy which sets a limited period for coverage. Basically, this is a form of insurance which has the most basic areas of coverage, with the shortest term of one year, with no savings integrated in the policy, and provides a death benefit.
In order to fully understand the meaning of term insurance, a comparison must be made between it and another form of life insurance which is the permanent insurance.
Difference Between Term Life Insurance and Permanent Insurance
Another form of life insurance is the permanent insurance. By looking at the definitions of the two forms, one could immediately take into account the first words preceding "insurance". Term life insurance conveys that it is the type that is of a limited duration or one having a specific term or a period with one year being the shortest period that it could hold validity. On the other hand, permanent life insurance depends on the life of the insured person, and payout is guaranteed at the end of the policy with the assumption that the policy is updated. This is also more expensive than term insurance because it does not expire as long as it is kept current.
Term insurance has been the popular choice due to its affordability. Not only it is reasonably priced, it also offers a wide area of coverage. The areas covered by term insurance are tuition fees of children in school, debts, liabilities, mortgages, funeral costs, and businesses. Although it is for a short term, the coverage of this type of insurance is vast enough to answer the most basic needs of an individual or a family.
Permanent insurance has a wider scope of coverage, has extra features included in the policy, and is more expensive than the term insurance. It has the capability to accumulate funds of which the insured could borrow advances to pay for a child's college education, for a liability, or for other needs to be met. It also provides a death benefit for the beneficiaries of the insured which includes funeral costs as well. Most of all, this type of insurance does not expire and it continues to exist as the insured person ages.
The term insurance definition could be construed in relation to the benefits that it offers. Although there is a big discrepancy between the advantages in choosing a term insurance over a permanent insurance, having insurance even for just a particular period of time is way better than having nothing at all. It still offers security in times of need and affords protection to the insured and his family.
In the future, more insurance policies would come out, with newer terms to indicate more benefits, but the term insurance definition would always be remembered as getting lots of benefits at a minimal cost.