When defining term insurance, we need to know both what it is, and what it isn’t. What it is, is a level term product that will pay a lump sum whenever it’s policyholder dies or is terminally ill. For the policy holder, this means some peace of mind that the family will have some financial security to help them get through. It’s a type of plan that can be set up in a way to pay off whatever existing debts you may have. It will pay your mortgage, or provide a lump sum for your loved ones in the bank. It’s a big help for grieving families not to have to worry about money for a while.

Also when defining term insurance, we need to know that it’s different from mortgage insurance. This type of policy is a long term policy designed to be taken out for a span of fifty years. The premium doesn’t change for the life of the policy, and the final benefit remains intact as well.

With your mortgage insurance, you’ll find that it’s life is just like the life of your mortgage. It maintains the same premiums, but when it comes to the payoff, it reduces along with the total of your remaining mortgage. Should you die at a point in your life where you owe only $1,000, then that’s the amount you would collect from your policy.

As a standard issue, terminal illness coverage usually is included in your term life insurance policy. There’s a clause in the policy to trigger payment in the event of terminal illness. This usually happens when the diagnosis specifies around a year or so before death. At this point, a payout can be made to either the policy holder or someone with power of attorney, and in a lump sum. This is really a good benefit for the remaining life of the policy holder.

Once the payout has been made due to terminal illness, the policy lapses. This will conclude any further obligation by the insurance company to the policy holder.

Many of these term life policies come with exclusions and restrictions. This can be something like a term policy holder who should become ‘critically’ ill, but not necessarily ‘terminally ill’. Then the payout may not be so easily forthcoming. The only way to collect in this situation, is if there was a ‘critically ill’ policy added to the term life insurance policy.

Hopefully, by defining term insurance in this article, you get a much better idea of what’s best for you and your family.