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Term Life Insurance
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Life insurance is a contract between the insurance company and the applicant. According to the policy, if the premiums are paid regularly, the insurer would pay the face amount also known as the sum assured in case of the death of the insured to the beneficiary during the period of insurance. Having a term life insurance is an added financial protection you can give to your loved ones.
The emotional turmoil on the loss of a loved one is itself a big struggle and the financial struggle because of several payments which need to be done urgently after the death of the individual makes life difficult for the surviving family. There are capital gains taxes to be paid, mortgages to be cleared and other debts which need to be paid and if not any of these, the childrens education or having a stable income in the family even after the main source of income is no more. All these can be paid by the benefits which are paid after the death of the insured. When all these can be considered advantages of having life insurance coverage, the disadvantages can be that the face amount is paid only after the death of the individual and though many policies do have an accumulated cash value, this is very less compared to the growth of the money invested in other fields like stocks or funds. There are two types of term life insurance. Permanent life insurance is whole life insurance in which the coverage is for the whole life as long as premiums are paid regularly. Term life insurance is the insurance coverage of life for a limited period of time as stated in the policy. Term life insurance is usually purchased for needs which occur for a limited time period. For example, during the early days of family life when children are young and there are several mortgages to be paid off like mortgages on the vehicle as well as the house, it is quite a financial struggle and at this stage if death of one of the spouse occurs, the surviving family would have to face quite a financial struggle. Term life insurance can be considered an additional protection during this period. It is one insurance which has the lowest premium and gives the maximum amount of coverage. As it has a low premium, it is affordable also. Moreover, the younger the insured is, the lower the premium. Term life insurance is offered for a limited period of time, like five, ten, 20 or 30 years. Benefits are paid only if death happens during this period and if the insured is living at the end of the term, the policy expires and no benefits are paid. There are three types of term life insurances. Level term life insurance is the term life insurance in which the sum assured remains the same all through the term, i.e. the same sum assured would be paid even if death
of the insured happens in the first year or the last year of the term of the policy. In decreasing term life insurance, the sum assured decreases over the period of time. Considering the fact that the financial requirements for which the term life insurance was brought, like the mortgage on the house, decreases over the time and so the need for increased face amount does not exist. In increasing term life insurance, the sum assured increases after every certain period of time. The face amount starts at the benefit level and increases till a particular stated amount is reached. This insurance assures that the surviving family would not be in need of money after the death of the insured. Usually insurers offer the facility of renewing the insurance after the term is reached. The insurance would be renewed for another term, if so desired. And insurers usually offer the renewal of the insurance without the need of proof of the health of the insured. This renewal facility is offered at an increased premium. If the individual feels that the insurance is needed for longer time, it is better to renew the term life insurance for another term. This is because, usually term life insurance is purchased at a younger age and as you get older the health condition might worsen. If you wish to purchase a new insurance, be it term life or whole life, at this stage, you would have to pay more money on the same than the amount that you would have to spend renewing the existing term life insurance even paying the renewal charges or the increased premium that you have to pay. Renewal facilities are offered on a particular term life insurance till a certain age is reached. For some insurers, the age limit is 70years.Or some insurers offer renewal facilities till a particular number of renewals are reached. While purchasing the policy, it is better to see the options the policy offer regarding the renewal facilities. Some insurers consider the age of the insured at the time of renewal to calculate the premiums, so the insurance might get costlier as age increases. Insurers also offer the facility of conversion to term life insurance, i.e. at any time during the policy period, if so wished; the applicant can convert the term life insurance into a permanent life insurance. This would benefit the individual, in cases where the health of the insured is worsening and buying a new insurance would be costlier at this time and also the need for insurance is more for a longer period of time. This is to say that even after paying the conversion charges and an increased premium, the conversion of term life insurance into a permanent life insurance would be cheaper. Deciding on the insurance that you need to purchase is a wise decision that you have to take. The need of the time, whether temporary or permanent, is very important when you have to choose between a term life and permanent life insurance. Also the affordability of the insurance coverage needs to be looked at before purchasing the insurance. Once you have decided on the policy, it is important to select the insurer wisely as there are a lot of insurers in the market offering the same policies. The service record of the insurer becomes a matter of consideration while decision is made on purchasing a term life insurance.
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