Insurance Term Life Insurance
With term life insurance contracts you buy protection for your whole family at really low costs.
Term insurance, also called term assurance, is a life insurance policy that provides coverage at a fixed premium, for only a limited term or time frame. After the specified period is over, coverage at the previous premium rate is not guaranteed any longer. The insured or policy owner must either forgo the coverage or gain further coverage at different payments or conditions. In case the policyholder dies during the specified term, the death benefit is paid to the beneficiary.
Generally, term life insurance is more preferred in favor of permanent life insurance policies because it is much more affordable (depending upon the specified term). A term insurance policy is the least expensive way to buy a substantial death benefit. It is the contrast to permanent life insurance policies that guarantee coverage for lifetime, at a fixed premium.
Since term life insurance policies offer pure death benefit, their main objective is to provide coverage for financial responsibilities for the insured or his/her beneficiary. Such responsibilities could include, but aren’t limited to dependent care, consumer debt, university education costs for dependents, mortgages and funeral costs.
1. Annual Renewable Term: A version of term insurance that is commonly bought is annual renewable term. In this plan, the premium is paid for 1 year of coverage. However, the policy is guaranteed to continue each year for a specified period of years. The period varies anywhere from 10-30 years, and occasionally until the age of 95. The premium becomes slightly higher, but the possibility of the benefit being paid is much higher.
2. Level Term Insurance: Annual renewable term insurance is a guaranteed policy in which the premium is guaranteed to be the same for a specified period of years. Usually, the term is 10, 15, 20 or 30 years. The premium paid every year continues to remain the same for the entire duration of the contract. This premium amount is based upon the summed cost of every year's renewable term rate, along with the time value of monetary adjustments made by the insurance company. The longer the term, higher is the premium.
Both term and permanent life insurance policies use the same mortality tables to calculating the cost for insurance and the death benefit is tax-free. However, the premium for term insurance is substantially lower as compared to permanent life insurance. The reason why the cost is significantly lower is because term plans might end without having to pay out, whereas permanent policies eventually have to pay out.
Term life insurance policy offers affordable coverage because the coverage is only for a fixed number of years. It is best to buy term life insurance if you want:
- To get maximum coverage at an affordable cost.
- To supplement a permanent life insurance policy during years when your expenses are higher.
- To cover a specific financial responsibility like college expenses or a mortgage.
To find out how affordable a term life insurance policy can be, request for quotes from different insurance providers. Like most insurance policies, term policies can contain limitations, exclusions, reductions of benefits and conditions to keep them in force. For more details, consult an insurance representative.