Tracy wanted to take out a life insurance policy but did not want to the pay high premiums or risk losses on investments associated with whole life insurance. Therefore, she took out a term life insurance policy for a period of ten years so that if Tracy died within those ten years, her husband Roy, as the beneficiary of the policy, could collect the proceeds.
term life insurance
Definition
A life insurance policy whereby the insured purchases coverage lasting for a specific period of time. The designated beneficiary collects the proceeds only if the insured dies within the specified term. There is no investment component to the policy, so the insured cannot surrender the policy for cash value during his or her lifetime. Usually, as the insured ages and the risk of death increases, either the premium amount increases or the amount of insurance coverage decreases. Also termed term policy.
Definition from Nolo’s Plain-English Law Dictionary
No-frills life insurance, with neither cash surrender value nor loan value (an amount that can be used as collateral for a loan). Term life insurance provides a pre-set amount of coverage if the policyholder dies during the period of time specified in the policy. Policyholders usually have the option to renew at the end of the term for the period of years specified in the policy. Unlike whole life insurance, premiums generally increase as the insured person gets older and the risk of death increases.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:25 pm
“Term [life] insurance is … insurance for the specified term only; the premium being calculated on a basis which provides for such deaths only as occur during the term. The premium paid is ‘level’ during the specified term only, and increases with each renewal term. The premium in the case of term insurance is consequently lower than in the case of straight life insurance, the premium in the former case carrying no reserve, being based upon a sort of ‘pay as you go’ theory.” Gans v. Aetna Life Ins. Co. of Hartford, Conn. 161 A.D. 250, 253 (N.Y.S. App. Div. 1st Dept. 1914) (Hotchkiss, J.).
