One might quickly offer the definition of Term Life insurance as “the least expensive form of life insurance”. When it comes to adult things like this, (even though I am an adult), I usually end up telling people they need to “explain it to me like I’m a 5 year old.”

Only then does this convoluted adult-type nonsense start to make sense. In appreciation of these kind lambs that so generously dumb it down for me, I am setting out to explain Term Life Insurance to you in a way that you (if you are like me) will understand.

Term Life Insurance is indeed the less expensive of the other forms of life insurance. Term Life Insurance covers an individual at a fixed rate of premiums or payments for a certain and limited amount of time.

When that amount of time is up, the purchaser must now decide if they want to end their coverage or be subjected to a possibly higher and laughable increase in their premiums or at least different rules or conditions to their policy.

That being said in order to properly define Term Life Insurance, I am still going to have to talk about what we all don’t want to talk about – death. Dying. Kicking the proverbial ol’ bucket.

Since this is basically what life insurance is in anticipation of, by my definition of Term Life Insurance, you may have deduced that you had better aim to die within your set term if you’re to get your beneficiary the most for your money, otherwise the new higher rates or changes to your plan may just give you a heart attack! This is in not advisable, but it is a fact of life insurance.

However, I suppose life isn’t just all about getting your money’s worth when it comes to insurance and the good thing is that as long as you make your payments on time and current, not letting your contract expire, if something were to happen to you, the Term Life Insurance will pay out what is claimed up to what exactly was insured.

“But what if I never use it?” You ask. Well, as I help define Term Life Insurance in my way, I will portray it in a nicer, friendlier way than a stuffy old insurance company would – Consider yourself lucky and no, you don’t get a refund or any kind of return of your money.

It’s a sad fact, but I like to think of it as the product that I am paying for is Peace of Mind and that’s that. “Well then, so what IS Term Life Insurance used for?” You ask. That’s an easy one.

It is purchased and used solely for any kind of debt or expenses that the insured person might need to still pay for if they decide to punch in their time card here on earth and head to the Great Beyond. After all, needing to pay off our credit card bills is no motivation for lingering on this plan longer than one may need to.

So whether you have funeral costs, credit card debt or any kind of consumer debt, dependants that need to go to college or a mortgage, which is ultimately what life insurance is here for- after you no longer are.

Now to define Term Life Insurance, I wouldn’t be doing myself justice if I didn’t tell you about the two types available. The first is an Annual Renewable Term Life Insurance.

This means that the term of your policy is one year, and you guessed it; if the insured dies within that year, the insurance company pays. However, if you even think about dying even one day after the very last day of your policy, then the insurance company forks over nothing.

Depending on how probable it is that the insured person will die in that one year term is what determines the premium. Yes, you are following me if it sounds like gambling but less fun.

The good thing is, the probability of anyone dying within a one year period of time is pretty much low enough for everyone; insurers usually accept this for coverage. Level Term Life Insurance is more popular than our friend Annual Renewable Term insurance.

Here the premium is promised to be the same amount for anywhere from 10 to 30 years. The premium paid each year for this type of insurance stays the same for the entire length of the contract. The cost is based on the total cost of each year's annual renewable term rates, with a time value of money modification made by the insurance company.

So basically the longer the amount of time that the premium is steady for, the higher the premium, because the older and more expensive to insure years are based into the premium. Wow! That was a mouthful.

Hopefully, you’re still with me. Term insurance, like Permanent insurance, actually uses what is referred to as a mortality table for determining the cost of someone’s insurance and payout upon death.

The good news is that the payout is tax free. The bad news is you’re dead, so someone else gets the money. However, obviously the premiums are going to be different.

This is because the costs different are that term types may expire without the insurance company even having to pay out anything, while permanent programs must eventually always pay out so you can understand why that might cost a bit more money.

Insurance industry studies have actually proven that the likelihood of even filing a claim under a term insurance policy is extremely unlikely! One study even placed the percentage as low as 1% of all Term policies having to pay out a benefit at all.

This is great because it allows term insurance to be so affordable due to a combination of, there being such a low possibility of an average person of good health dying in a short period of time.

So to fully define Term Life Insurance let’s make sure we all understand that is a cost effective way to peace of mind. Because of the low likelihood of an insurance company having to pay out, I officially define Term Insurance as an opportunity of a LIFETIME! So to speak...

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