| Term life insurance is a type of temporary life | | | | paid only 2400 $ as premiums, her 2400$ are |
| insurance. The purpose of term life insurance is to | | | | saved as compared to the permanent life |
| reduce financial risk for a fixed period usually | | | | insurance policy which she can invest and make |
| between one to twenty years. One example will | | | | profit. In the US market the 2400$ if invested |
| make things clear. Sarah buys a life insurance | | | | wisely would have yielded much more than 4800$ |
| policy to insure her husband John's life. She pays | | | | to Sarah in 20 years. |
| 20$ premium per month to the life insurance | | | | The idea behind term life insurance is to buy a life |
| company. The period of life insurance is for 20 | | | | insurance policy for a period usually one year. The |
| years. So if John dies within 20 years, Sarah will | | | | premium (the amount you pay to the life |
| get 4800 dollars. However if John doesn't die | | | | insurance company) is much less compared to a |
| within 20 years Sarah will get some money after | | | | permanent life insurance premium. The insurance |
| 20 years which will be much less compared to | | | | can be renewed after the expiry of the life |
| 4800 dollars. | | | | insurance term, but the premium keeps increasing |
| However if she buys a term life insurance of | | | | as the insured ages. The higher the age of the |
| 4800 dollars for 20 years, she may have to pay | | | | insured, the higher is the premium. |
| premium of less than 20 $, say 10 $ a month. If | | | | Term life insurance is the cheapest life insurance |
| John dies within 20 years Sarah will get the death | | | | available on coverage to premium dollar basis. The |
| benefit of 4800 dollars, however if John doesn't | | | | death benefit is non-taxable in the United States |
| die within 20 years, Sarah will get no cash value | | | | and the premium is also deductible from the |
| at the end of 20 years. However since she has | | | | income to save income tax. |