What is the meaning of terms in policy?

Term insurance is the cheapest way to get a guaranteed life insurance benefit for a defined amount of time. It has two design features which make it attractive this way:

1. A contractual guarantee on both the premium and the survivor benefit for a defined amount of years (10-15-20-25-or 30 years, depending on the company, the age of the insured, and other factors).

2. No capability of accumulating cash inside the policy. You can't pay an extra premium to get extra benefit; you can’t transfer money from other accounts into the policy, and the carrier will not pay dividends or apply interest to your account.

This product is ideal for covering yourself for a single need, for a specific amount of time. These could include indemnifying a mortgage or business loan, meeting the obligations of a divorce decree, or bridging the gap until life insurance is no longer necessary. The kicker, of course, is that if you outlive this time, and still for whatever reason need coverage, then term insurance could become extremely costly. The price typically increases astronomically after the guarantee period.

If you are considering buying term, give some thought as to whether you still might need coverage longer than you anticipate. If so, then you might want to go with a permanent product and lock into rates for the long term.