What, When and Why Do I Need Term Life Insurance
October 15th, 2007 | 
Author: Term Life Insurance is a temporary life insurance that provides protection for a specified period of time at a very affordable low rate. The duration of term life insurance policy varies from one, five, ten, fifteen to twenty years or expiring at some specific age. A death benefit is paid to the beneficiary if the insured dies within a specified period of time while the policy is still in force. If the insured lives longer than the term of the policy or stop paying premiums, the policy is no longer in effect. The insured builds up no equity in a term policy.
Term life insurance is purchased because it is the simplest form of life insurance, which provides the greatest insurance protection at the lowest initial premium. It is useful in providing temporary life insurance cover for individuals who could not afford the higher premiums of the other types of life insurance. It is never used when there is a permanent need for insurance to provide estate protection or business continuation. Otherwise, it is the least expensive form of life insurance protection a person can buy. Its lower cost makes it possible to use the extra money arising from the difference between the low premium of term and the relatively high payments for straight life, for more rewarding investments.
Term life insurance can be used as a tool to provide life insurance for the duration of a financial loan, mortgage loan, or employment of key-person. It can be taken out to cover a period of higher expenditure when the children are at college or university to ensure that their education will not be disrupted due to the untimely disability or demise of the breadwinner.
Basic term life insurance is non-participating in the insurance company’s profit performance and hence carries little or no cash values. Premiums for term life insurance are determined at the point of purchase and will remain the same for the duration of the policy period. The premium will change upon renewal and usually at a higher rate due to older age. In the long run, the total term premiums paid when compared to life expectancy are more than a permanent insurance.
Some of the features of term life insurance include option for renewal (Renewable Term Life Insurance), conversion (Convertible Term Life Insurance), both renewal and conversion, reducing sum assured (Decreasing Term Life Insurance) or increasing sum assured (Increasing Term Life Insurance).
In general, term life insurance is suitable when your life insurance needs are temporary, or your life insurance needs are long-term but your budget does not permit the higher premiums of permanent life insurance.
Posted in TERM LIFE INSURANCE