The buzz over whether you should buy an insurance plan or not is a never-ending debate. People are always confused if they should buy a life insurance or not? What is the cost of term life insurance? Whether I will be able to afford it or not? Do I need a medical or car insurance? All these and much more are always looming in your mind when you have decided to buy an insurance policy. Out of all, life insurance holds the highest popularity because of its significance and potential necessity but many of us would be apprehensive about buying one because of its affordability. However, for such a situation a term life insurance seems a much better plan that will cover your needs sufficiently.
Before going over the details, let us first understand what a term life insurance is.
It is a type of insurance plan that is limited for a certain time period. Once that period is finished or over, the policy owner gets the right to end the plan or renew his coverage as against permanent life insurance which gives protection for life.
There are several characteristics to a term life insurance.
- Low cost: It is advisable to buy a term life insurance when you are under a strict budget because it is temporary and pays the death benefit to the beneficiary if the insured one dies during the term. Buying a term life insurance for wife would be helpful in case of such unfortunate events and is even less risky than other kinds of plans.
- Devoid of cash value: A term life insurance has no cash value because it is the permanent life insurance that holds this cash value mess. A policy holder just needs to pay the premiums periodically and even the policy holder can borrow against his life insurance policy.
- Easily convertible:For many term life insurance policies it is a privilege given to the policy holder to change his current term life insurance plans to whole life or some annual renewable policy.
- Scalable: It is sometimes a liberty with these term life insurance policies that their terms could be decreased and the premiums remain the same even on a decreasing face value.
- Flexible Premiums: Depending on your income status, tenancy, expenses or death in your family, you may increase or decrease the amount of premiums.
- The Facility of Renewal: The term insurance policies are easily renewable if your term is coming to an end and you are about to be uninsured or are in dire need of life insurance due to your failing health. The policy owner can easily renew the policy on the same premium rates and without any hassles of re-qualifying.
- Rider facility: A Rider is said to be an ad-on provision in the general life insurance policy that help policyholders in creating insurance products i.e. the guarantee of payment on the covered claims as per the requirements of the rider. These rider facilities could be your spouse or children and has additional premium on the top of the regular premium that you are already paying in your original insurance policy.
For your further knowledge on term life insurance policies, we would like to tell you a little about different types of policies that comes under it.
- Annual Renewable: It is for a short time period that could be renewed every year for a certain term. With every renewal, the premiums increase.
- Guaranteed Level: It has defined yearly premiums that never goes up during the entire term of policy and this policy has a certain expiration which is somehow a drawback for some policy holders. There might be some clauses on the policy that will allow the owner to renew the policy on its termination.
- Return of Premium: It is the type of policy in which a refund is guaranteed when the term ends which is likely to be a term period of 15, 20 or 30 years as per the subject matter on the policy.
- Decreasing: In this type of plan the premiums are reduced with the ageing of policy which results in a decrease in death benefit. This is beneficial for those who have a greater burden on their financial aspects.
- Modified:In a modified term life insurance there is another payment framework whose premiums may differ but they offer the same protection.
But, obviously term life insurance has some really great benefits to look for.
- In the time of need, the term life insurance policy will prove to be a life saver in paying out several expenses like medical bills or tax returns etc.
- It may even bear the responsibility of paying your mortgage so that your spouse don’t have to worry over that.
- It will be a source of income for the family who have lost the sole earning member. It can pay for the higher education of your children.
- This is also used by businesses for buying or selling of agreements or as a key person insurance.