Most everyone is familiar with life insurance, but not everyone is familiar with level term life insurance.
What is 20 year term life insurance?
In short, it is a life insurance policy that covers you for a set period of twenty years and the payout stays level. If you die witin the 20 years, your beneficiary or beneficiaries receive the full amount of your policy.
If you happen to outlive the coverage term, your policy expires and you don't receive anything.
This type of insurance is considerably cheaper than other kinds, like whole and universal, so it is the best choice for most people.
Term life insurance differs from whole life in another way as well. Whole life insurance is more expensive than term insurance (10, 20, 30) because in addition to life insurance, the insurance company pays dividends on the policy, thus making it possible for a policyholder to borrow against the policy if they need extra money.
Term life insurance does not have this built in benefit, but at the same time, the premiums are much lower because of it. You pay strictly from insurance and get nothing else in return, thus you get just insurance and not dividends that you really dont need anyway.
Whole life is fine for those who want to use their insurance policy as a small investment as well, and it does come in handy if you find yourself short of cash, but some term policies also have a cash surrender value after about two years if you need money for something urgent. The purpose of life insurance is to pay for burial expense and to take care of your family after you are gone.
The small dividends that the company pays on a whole life policy do not add very much to the face value of the policy in the end, though it adds quite a large amount to the premiums each month.
Level Term life insurance is the least expensive policy to choose, and it gives you just what you need to protect your family if you should die.
There is no need to pay for extra frills that you dont need, and a 20 year term insurace policy (twenty year) is just the right amount to cover your children from birth through high school graduation.
The only disadvantage to this policy is that if you choose to convert it to a whole life policy at the end of the terms, you will pay the higher premium based on your age. At the same time, if you took it out as soon as you began working, and are still under age 45, you may still get some good rates. Compare whole vs term life insurance.