Listen to the radio and you will hear endless advertisements for term life insurance. So, what exactly is it? Glad you asked.

Term life insurance is the original kind of insurance. It provides a basic payout in the case of the death of the policy holder during the time span of the term. There is normally no extra premium that is invested and the policy does not accumulate a cash value during the term. It is the simple wager concept of the old life insurance adage. The Insurance Company makes a bet that you will not die during the term. You are, in a way, making a bet that you will die. If you do die, you win. If you do not die, the Insurance Company keeps the premiums that you paid.

Despite the irony of viewing term life insurance in that manner, it does play a vital role in the personal financial planning process for many people. It is basically risk management. The idea is usually to provide for other people who might be dependent on you for support. This support might be simply the replacement of lost wages in case of death, but also includes other factors such as education expenses, mortgage payments, and even funeral expenses.

Term life insurance is a viable pursuit for the Insurance Company because the statistics show that a normally healthy person has a very small risk of dying during the term. In other words, they win most of the bets. Since a medical examination is usually part of the process, terminally ill people would not be eligible to purchase normal term insurance. The terms can run for any period of time although most of them run from 10 years to 30 years in length.

A term life insurance policy can be renewed when it expires although most likely the premiums will be higher. There are several different ways that the premiums are calculated. In some policies, the option to renew is guaranteed and the premiums are averaged for the life of the term. In this way, the premium remains constant although it will tend to be a bit higher at the beginning.

Term life insurance is generally the less expensive option when considering risk management. Since there are no additional funds being added to the premiums for investment purposes such as happens in whole life policies, it is merely the death benefit that is being purchased. This lack of investment potential does not bother most financial planners. There are many other investment opportunities available that promise a much greater return than insurance investments. When you are considering insurance as a protection to your dependents and your interests in the case of an untimely and unexpected death, term life insurance is a sensible option.