What is Term Life Insurance?
Term life insurance is a policy that provides coverage for a specific period of time, usually ranging from 10 to 30 years.
It pays a death benefit to the named beneficiaries if the insured individual dies within the term of the policy.
The premium amount for term life insurance is generally lower compared to permanent life insurance.
The coverage ceases at the end of the term.
How does Term Life work?
When you purchase a term life insurance policy, you pay a premium (monthly/semi/annual payment), and in return, the insurance company agrees to pay a death benefit to your named beneficiaries if you die within the term of the policy. The premium you pay is based on factors such as your age, health, and the amount of coverage you are seeking. This premium will remain the same for the entire term of the policy.
The death benefit amount can be used to pay for end-of-life expenses, such as funeral costs, and to provide financial security for your loved ones.
If you outlive the term, the policy will expire without providing any death benefit. You can either renew the policy for another term at a higher rate or convert it to a permanent life insurance policy.
Who is Term Life best suited for?
Term life insurance is best suited for individuals who have a temporary need for life insurance coverage, such as those with young children, a mortgage, or other short-term financial obligations. It is also a good option for people who are on a limited budget, as the premiums for term life insurance are generally much lower compared to permanent life insurance.
Term life is ideal for those who want to ensure that their loved ones will have financial security
in the event of their unexpected death, without having to pay higher premiums over their lifetime.
There are two kinds of term life insurance policies:
Level Term and Decreasing Term.
Level Term
Level term is typically used to provide coverage
for a financial need that remains constant over time,
such as protecting your family and assets in the event
of your unexpected death, disability, or illness.
Decreasing Term
Decreasing term is used to provide coverage
for a specific financial obligation such as a mortgage or loan.
The death benefit of the policy decreases over time
in line with the decreasing balance of the financial obligation.